Netflix Has 1.5M UK Subscribers, But Binge-Viewing May Hurt Bottom-Line Profits

Netflix has 1.5 million paying subscribers in the UK, according to Q2 reports released by the company, and may be edging closer to 2 million soon.The company has not been very public with its UK numbers, but overall has 38 million customers worldwide, with only a little more than 7 million in its 40 international markets. Yet, the release of new original series like “House of Cards” and “Orange in the New Black” seemed to have increased the company’s subscriber base in the UK.However, the binge-release of original programming may prove to be a bit of a ROI conundrum for the online video streaming giant. Variety reported on a almost unnoticeable disclosure in the company’s 10-Q filing:”We are in the early stages of original content, and continue to monitor whether the viewing pattern is higher than initially expected in the first few months to suggest that we amortize at a faster initial rate,” the disclosure read.What that basically means is that binge-viewing doesn’t allow the company to amortize its profits from advertising as long as serial programming does. Therefore, the company may need to spend more to see returns. Unlike syndicated shows, which may have 50 viewers in year one after purchase of rights, and 50 in year two, original content is getting 100 viewers up front in year one and may see negligible audience numbers in year two.In addition, while binge viewing is a nice customer benefit, content dumps are a poor retention tactic for subscription sites. Serial or drip content is always better for extending account lifetimes. Content dumps are more likely to increase churn as trial-takers sign up for free, watch all episodes of a series, and unsubscribe.Luckily, Netflix has issued one great retention tactic this quarter — My List, which will replace Instant Queue.

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