Netflix Is Shelling Out Less On Marketing, And Not Just Because Of The Pandemic

Netflix will spend less on marketing this year in part due to COVID-19 – but the streaming platform was planning on moving in that direction anyway.

Netflix will spend less on marketing this year in part due to COVID-19 – but the streaming platform was planning on moving in that direction anyway.

“In terms of the march toward less traditional media, we’ve been on that for some time,” said Netflix chief content officer and newly appointed co-CEO Ted Sarandos on the company’s Q2 earnings call Thursday. “A more efficient, more impactful and more global way to talk to our members is not always through the most traditional channels.”

(Guess the billboard company that Netflix bought in 2018 doesn’t count.)

Marketing spend as a proportion of revenue was 7% in Q2, down 28% YoY, which is “extraordinarily low,” Barclays managing director Kannan Venkateshwar noted on the call.

Netflix did expect marketing to be flat this year, said Spencer Neumann, the company’s CFO. Press junkets and launches went virtual, and Netflix didn’t do as much awards marketing in the quarter. Some changes will be temporary, he said, and others will be permanent.

Still, Netflix’s newly appointed CMO and former Uber chief brand officer, Bozoma St. John, will have a roughly $2 billion annual marketing budget to play with when she officially starts her new job in August.

The split between performance and brand will be interesting to see. Netflix doesn't need to spend on awareness, especially with people still hanging out at home and most movie theaters shut or operating at much lower capacities.

But although Netflix’s marketing spend is down, it’s actually “doing more to attract buzz and attention to our shows, trying to cut through a world where there’s a lot of choices,” Sarandos said.

“Our investment in time, energy and dollars goes into building the conversation, the zeitgeist, the buzz around our shows and our stars,” and in amplifying those things “even when you’re not on Netflix,” Sarandos said, although he didn’t elaborate on specific tactics.

Netflix added 10.1 million net new subscribers in Q2, well over its original guidance of 7.5 million, although the company gave conservative guidance for Q3. Netflix expects just 2.5 million paid net new adds for the third quarter – vs. 6.8 million the year before – in part because Netflix “pulled forward” demand from the second half of the year into the first.

The lowered guidance pushed the company’s stock down more than 8% in after-hours trading.

Revenue for the quarter was $6.15 billion, a slight beat on revenue expectations of $6.08 billion.

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