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Netflix Takes a Crown From HBO

Since first debuting original content in 2013, Netflix (NASDAQ: NFLX) has taken the world by storm. With more than 125 million customers (and rising), the company has proven that its programming strategy is the key to its growing subscriber count.

Netflix also was determined to make a name for itself in the realm of awards, with an increasing number of Emmys every year since 2013. However, the company had long trailed AT&T's HBO, which it used as both a role model and motivation to succeed. Netflix Chief Content Officer Ted Sarandos once famously said, "The goal is to become HBO faster than HBO can become us."

And Netflix seems to be succeeding in that goal, with the latest evidence coming in the form of Emmy nominations.

A woman wearing a crown and a man in a tuxedo smiling in a scene from Netflix's The Crown starring Claire Foy and Matt Smith.
A woman wearing a crown and a man in a tuxedo smiling in a scene from Netflix's The Crown starring Claire Foy and Matt Smith.

Netflix original The Crown brought home 13 Emmy nominations. Image source: Netflix.

The Emmy (nomination) goes to...

For the first time in 18 years, HBO didn't walk away from the Emmy nominations with the biggest haul. That privilege went to Netflix, which was able to upset its longtime opponent by garnering 112 nominations to HBO's 108.

Company

2013

2014

2015

2016

2017

2018

Netflix

14

31

34

54

91

112

HBO

108

99

126

94

110

108

Data source: The Verge.

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This marks an incredible culmination of events, since Netflix was nominated for its first Emmy just five years ago. This year, the streaming giant received nominations for 40 different programs in a variety of categories.

The Netflix shows with the largest number of nominations will be well-known to investors and viewers alike:

  • The Crown -- 13 nominations

  • Stranger Things -- 12 nominations

  • Godless -- 12 nominations

  • GLOW (Glorious Ladies of Wrestling) -- 10 nominations

It was inevitable

Netflix has made a number of moves to ensure the continuing quality of its shows as it moves further and further into the realm of exclusive, original programming. The company has signed deals with a number of prolific creators to produce shows under the Netflix banner. These include Mark Millar, Shonda Rhimes, Jenji Kohan, and Ryan Murphy, who collectively account for some the best-known and most watched characters in film and television.

The company is also determined to have something for everyone, and to that end, Netflix will release over 1,000 original programs this year and devote an increasing amount of resources to its self-produced content. At an investor conference earlier this year, Sarandos said "85% of all new spending is on original programming."

Netflix also plans to release 80 feature films in 2018 that will span the gamut "from sub-$7 million indies, all the way up to $100 million-plus blockbusters and everything in between," according to Sarandos.

All those original television series, movies, and other productions don't come cheap. Netflix plans to spend nearly $8 billion this year on programming, up from just $6 billion last year.

Stranger Things 2 characters Will, Mike, Dustin, and Lucas looking into the camera.
Stranger Things 2 characters Will, Mike, Dustin, and Lucas looking into the camera.

Netflix original Stranger Things got 12 nods. Image source: Netflix.

It's all about the subs

While the industry accolades are nice, the true measure of success can be found in the company's growing list of subscribers. In the just-reported second quarter, Netflix grew its customer base by 5.15 million, slightly behind the 5.2 million the company added in the prior-year quarter. The latest number was more than 1 million fewer than what the company had forecast for the quarter and represented a rare miss by the streaming giant.

This was in stark contrast to the previous four quarters, when the company added a total of 26 million new subscribers, drastically outperforming its guidance and adding a combined 6 million more members over the period than it had anticipated.

Netflix CEO Reed Hasting sought to reassure investors on the conference call to discuss the latest results, pointing out that it wasn't an exact science and that a similar miss had occurred two years earlier -- also in the seasonally weaker second quarter. "We've seen this movie of [second quarter] shortfall before -- about two years ago in 2016," he said. He went on the say that there would occasionally be "lumpiness in the business."

Netflix will likely exceed HBO's total global subscriber count of 142 million sometime this year. When that happens, the last milestone will have fallen, and Netflix truly will have achieved its goal of becoming HBO.

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Danny Vena owns shares of Netflix. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy.