Netflix, Inc. (NASDAQ:NFLX) is moving into Hollywood. The on-demand video streaming giant recently announced that it had entered a long-term lease agreement for a significant portion of the ICON office tower at Sunset Bronson Studios. The Sunset Bronson location is of historical significance in Hollywood: it’s the original location of Warner Bros. (Source: Netflix, last accessed August 28, 2015.)
Netflix is moving its Southern California staff to the new location. The company is expected to occupy 200,052 square feet, around two-thirds of the ICON office tower’s total capacity.
Eric Garcetti, Los Angeles Mayor, welcomed the move by Netflix. He said that the company’s relocation decision “reaffirms that Los Angeles remains the nexus for innovative tech and creative companies, and that the future of the entertainment industry will call Hollywood home.”
Moreover, the mayor also said that his team would assist Netflix with relocation and permit approvals.
Taking Over Hollywood
Other than the physical move of its location, investors should know that Netflix is on a broader mission: taking over Hollywood’s business.
The company knows that to continue its success in the on-demand video streaming business, it needs to differentiate its service by having original content. So far, Netflix has made tremendous progress creating original content.
In the second quarter of 2015, the company launched the largest number of Netflix original series. These include Marvel’s Daredevil, Sense 8, Dragons: Race to the Edge, Grace and Frankie, and Season 3 of Orange is the New Black.
Note that Netflix is not satisfied with just original series. The company is also aiming at the movie business. It expects its global content expenditure to approach $5.0 billion in 2016. The investment includes “not only series, documentaries and stand-up but also feature films.” (Source: Netflix, last accessed August 28, 2015.)
The first of Netflix’s original films would be Beasts of No Nation, a gripping war drama from the award-winning director Cary Fukunaga. The movie is coming to Netflix members and in select theaters this October. The second original film, a satirical comedy called War Machine starring Brad Pitt, is scheduled to release next year.
Netflix’s Strong Growth Prospects
For revolutionary companies such as Netflix, investors seem to care more about its growth rather than how much money it makes. And on the growth front, Netflix does not disappoint.
In 2012, the company had 33.3 million subscribers worldwide. The number increased to 44.4 million by the end of 2013, and to 57.4 million in 2014. By the second quarter of 2015, Netflix had a whopping 65.6 million subscribers worldwide.
The U.S. remained the largest market for Netflix with over 42 million subscribers. However, the company’s international growth has been strong. Among the 3.3 million new members added in the second quarter, 2.4 million come from overseas. The company’s international business also brought in decent revenue. In the second quarter, international revenue surged 48% year-over-year despite a negative $83.0 million impact from currency headwinds.
Netflix’s Stock Price to Keep Soaring
A look at Netflix’s stock chart would show you how great the company’s performance has been this year.
Chart courtesy of www.StockCharts.com
Since the beginning of this year, Netflix’s stock price has surged an astonishing 140% from $48.80 to $117.32. This is particularly impressive given that the S&P 500 index slipped 3.6% year-to-date.
Most recently, Netflix’s share price took a dip as U.S. stocks tumbled. But the company’s shares bounced back extremely quickly. Since Monday’s closing at $96.88 a share, Netflix has climbed 21.1% in less than four trading days.
Netflix’s momentum seems to be strong, in terms of both its user growth and stock price. From what I see, the upward trend is about to get steeper.