Things have been a little bumpy for Netflix lately. The company has signed some big names (see: the guys behind Game of Thrones) to its production studio, though none of them have yet resulted in a breakout success for the company. At the same time, US subscribers dropped for the first time ever earlier this year. Netflix is also facing intense competition from rivals like Disney's new Disney+ streaming service, as well as HBO MAX.
Oh, and worst of all, it's set to lose its two most popular shows (Friends and The Office) over the next 15 months.
So, you can imagine that the team in Los Gatos is doing the happy dance with the news that Netflix app downloads are up 18 percent over the same period last year. That's according to Bank of America, which issued a note to investors pointing out the increase--which it largely attributes to the return of Netflix's hit original show, Stranger Things.
That's not hard to believe considering the company already said that the July debut of that show broke four-day records, with over 41 million accounts having viewed it. That's a very, very good sign for the company's bet on original content as a driver of growth. Right now, that looks like a pretty good bet.
Netflix needs some good news.
Here's why this is really good news for Netflix. Netflix used to be the place you went to watch other studio's content. You could find the movies (and later, TV shows) you loved, all in one place.
Originally, Netflix was simply a new--albeit remarkably innovative--distribution channel. But, because it was the only player in the game, it was a highly valuable platform for generating additional revenue for studios and producers.
Eventually, those content creators realized they already had the most valuable asset-- the content. As the technology became more accessible, those same studios decided they no longer needed Netflix to reach and audience, and could simply create their own service.
I'm not sure we've really figured out how much fragmentation consumers really have an appetite for, but so far there seems to be room for just about everyone. The difference is in the content. And content, it turns out, is everything.
Netflix is winning with original content.
This latest news shows that Netflix can compete on its own with are original content. It already has the largest platform, and even if it isn't growing as fast as it once was, if subscribers are joining Netflix for that original content, it will easily maintain its position as the dominant streaming service.
Of course, that's a big 'if.' In fact, if subscribers are joining for original content like Stranger Things, will they stick around once they've finished watching? That's always been one of the drawbacks (or benefits, if you're a consumer) of allowing binge watching. Sign up for a free trial, watch your favorite show, and cancel before the bill kicks in.
Even customers who pay for the service may not stick around if all of the licensed content they love ends up elsewhere, especially once they've watched the entire series of their favorite original content. And that original content is expensive--Netflix plans to spend more than $15 billion this year alone on both licensed and original content, with the bulk of new spending on original shows.
Still--and this isn't profound-- good news is always better than bad news, and Netflix has needed some good news lately. More app downloads means more consumers signing up for either free or paid accounts. If Netflix can keep those subscribers over the long term it wins. That may seem over simplified, but it's hard to argue that isn't exactly what Netflix needed right now in the streaming wars.