Nobody Really Knows If Netflix, Inc. (NFLX) Originals Are a Success

Second, Amazon.com, Inc. (NASDAQ:AMZN) is becoming an increasingly viable competitor. For example, Amazon has invested aggressively in top-notch content for its Prime Instant Video service over the past year or so. Moreover, as my colleague Anders Bylund recently discussed, Amazon.com, Inc. (NASDAQ:AMZN) is ramping up marketing for its video offerings.

The goal of Netflix’s original content is to offset these negative factors and boost subscriber growth. As we get into 2014 and the novelty of original content on Netflix starts to wear off, investors will get a better sense of whether original content provides a significant lever to grow the domestic subscriber base. If the U.S. membership base continues to grow 20% or more year over year, that will be a true sign that original content is “doing its job” for Netflix, Inc. (NASDAQ:NFLX). On the other hand, if subscriber growth starts to taper off, it will cast some doubt on Netflix’s heavy investments in this area.

Foolish bottom line
Investors are understandably anxious to learn whether Netflix’s recent foray into original content has been a success. However, in some cases this has led people to focus on metrics like “series renewals” that may not be very meaningful. Some observers have assumed that Netflix would only renew a series if it generated lots of viewing hours, yet the company just renewed Orange Is the New Black before a single episode had aired!

Investors should instead try to keep an open mind about the success (or lack thereof) of original content for Netflix, Inc. (NASDAQ:NFLX). Later this year and next year, when the novelty of these originals has started to wear off, we will start to see whether they have the staying power to keep the subscriber base growing at a healthy rate.

The article Nobody Really Knows If Netflix Originals Are a Success originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Adam Levine-Weinberg is short shares of Netflix and Amazon.com. The Motley Fool recommends and owns shares of Amazon.com and Netflix.

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