Netflix Inc. is still a Wall Street favorite as it climbed by as much as 160% in the year-to-date before it hit some turbulence. Analysts are still confident about its prospects and investors are buying the stock in droves. One of the key reasons behind Netflix’s increase in share price is the growth of its core business. The LA Times reports that the firm is growing as it plans to double its L.A. –area office space with a move to Hollywood.
The LA Times reports that Netflix is planning to move its So Cal operations from Beverly Hills to the center of video production action in Hollywood by 2017. It was reported that the firm has signed a long-term lease at 14-story Icon Building at Sunset Bronson Studios.
Netflix currently stays in Maple Plaza in Beverly Hills, where it has about 100,000 square feet of office space – as home to 400 out of its 2000 global workforce. The new office location will give Netflix about 200,000 square feet of offices to mark the largest office lease to be signed in Hollywood in terms of square feet.
Original Content is key to long-term growth
The move to Hollywood signals that Netflix is serious about making original content for its 65M+ users. Netflix CFO David Wells says, “Icon is a state-of-the-art facility that places Netflix squarely in the middle of Hollywood’s creative culture to support our next stage of growth and content creation.” He believes that “the property’s combination of office, stage and production space provides an ideal setting.”
Netflix has been working hard to create original content in a move that will reduce its licensing deals and reduce expenses in the long term. The firm has said that it would invest at least $6B in making original content next year. “House of Cards” and “Orange is the New Black” are still top hits from Netflix and the firm has a star-studded lineup of original content in the works.
The firm is making sure that its service is targeted at the whole family as it invests on making original content for kids. In 2013, Netflix signed a deal with DreamWorks Animation for 300 hours of original content. Now, the firm has Turbo FAST, Dinotrux, and All Hail King Julien, which has won three Daytime Emmys, including one for Outstanding Children’s Animated Program.
Analysts think Netflix can continue to scale up
Analysts at Trefis believe that Netflix should be able to raise its subscription prices at intervals as it continues to grow. The firm has raised its rates in Europe and the Trefis analysts believe that Netflix’s average revenue per subscriber will be around $10.30 domestically and $9.00 internationally by 2022.
The key reason behind the positive outlook for the firm is its investments in making original content. The analysts say, “we believe that the exclusivity of Netflix ’s future original content, along with its repository and complementary services … will help in increasing the company’s average revenue per subscriber at a faster rate.”