Tuesday, Jan 21st 2020

Netflix Q4 Earnings: Tossing a Coin to Your Witcher


Netflix rose over +2% after hours on Tuesday after reporting solid earnings that highlighted the business's strength in creating highly successful original content hits.

On the financial front, the company exceeded revenue estimates modestly, while reported EPS figures weren't comparable to analyst forecasts due to a one-time tax benefit.

Subscriptions also came in over 14% ahead of investor forecasts, driven by strength in international markets and offset slightly by the U.S.

However, what we were most impressed by was the blowout performance of The Witcher, a Netflix original series that is on track to have one of Netflix's biggest first seasons of all time.

The adapted series has already been viewed by 76 million subscribers - making it the rare video game-to-TV adaptation that is not only successful, but has actually also increased consumer interest in the original franchise more than a decade after original release.

For instance, various titles from the Witcher video game series are currently booking all-time high player counts on gaming platforms years (and in the case of the original title, decades) after their original release.

This is a dynamic that is rarely ever seen for single player games.

Meanwhile, after seeing an unprecedented surge in consumer demand, the original publisher of the book series just announced a reprint of the book to the tune of half a million new copies.

On Netflix itself, The Witcher wound up becoming the second most popular series on the platform in 2019 despite only being available 11 days of the year.

Why is all of this important?

Obviously, a highly viral TV series will benefit Netflix viewership and subscription counts in the coming years as public awareness around the series grows.

But more importantly, we think the improbable nature of its runaway success points to the strength of Netflix's core data advantage.

Because of the massive amounts of data it has on consumer viewership patterns, Netflix was likely able to identify Witcher as an attractive franchise to pursue.

Others without this advantage may have very well brushed it off based on modest historical precedents for other video game-to-TV adaptations.

So while The Witcher may just be one show, as long as Netflix keeps growing and improving its viewership and viewer data set, we imagine "the show will go on" for Netflix as a whole.

As of this writing, NFLX was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
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