TIME Media

This Is the Next Battleground for Netflix and Amazon

Gaby Hoffmann, Jeffrey Tambor, Jill Soloway
Richard Shotwell—Richard Shotwell/Invision/AP From left, Gaby Hoffmann, Jeffrey Tambor, and Jill Soloway speak onstage during the "Transparent" panel at the Amazon 2014 Summer TCA on Saturday, July 12, 2014, in Beverly Hills, Calif. (Photo by Richard Shotwell/Invision/AP)

The streaming wars continue to go global

Amazon and Netflix will soon be squaring off in a new Asian battleground. On Wednesday Amazon announced that it will bring its Prime Instant Video service to Japan in September. Netflix has had long-announced plans to roll out its own streaming service in the country on Sept. 2.

Amazon’s Japanese offering will include dramas, anime and variety shows popular in both the U.S. and Japan. Original shows like “Transparent” will also be available.

Amazon, which already offers Prime subscriptions in Japan, will have a significant price advantage. Amazon Prime costs ¥3900 (about $32) per year, or about $2.71 per month. Netflix will have multiple tiers starting at ¥650, or about $5.40 per month.

It reminans to be seen whether either service will find substantial success in the country. Hulu launched in the country in 2011 but ended up selling off its Japanese streaming business to the Nippon TV television network in 2014.

TIME Netflix

Here’s How Netflix Is Going After Teens

Netflix Inc. Illustrations Ahead Of Earnings Figures
Bloomberg/Getty Images

And why they're so important

Netflix is courting a demographic very different from the viewers of its mature House of Cards and Orange is the New Black series: teens and tweens. The streaming service is adding a handful of exclusive TV shows and movies to its lineup that target an audience that it says is often neglected, according to the New York Times.

Netflix will add two films from popular YouTube stars: Smosh: The Movie, starring the eponymous YouTube comedy group, and Bad Night, featuring Jenn McAllister and Lauren Luthringshausen. It has also licensed TV shows including Lost and Found Music Studios, Degrassi: Next Class, and Fuller House, a reboot of the 1990s classic Full House.

The streaming service is trying to put its fingers on the notoriously fickle generational pulse of the post-millennial generation: Generation Z. Tweens and teens spend an increasing amount of time on the Internet and using apps, but less time watching traditional TV. One study in the U.K. found that tweens and teens watch half the TV that adults watch, but six times more online video.

TIME Netflix

Netflix Is Excluding Hundreds of Workers from its New Paid Baby Leave Plan

Employees in its DVD-by-mail service won't get the benefit, a report says

Workers in Netflix’s DVD-by-mail service will not be able to avail themselves of the firm’s generous, unlimited leave for new parents, according to a report from the Associated Press.

Netflix’s DVD business, which employs roughly 450 people, makes use of less-skilled workers, such as those who sort through DVDs and stuff them into envelopes to be mailed. According to the report, “Protesting groups contend Netflix is unfairly favoring the mostly highly paid computer programmers and other technology specialists working in its internet video service over the lower-paid employees” in the DVD business.

“Netflix is leaving workers who could benefit the most from a generous paid leave policy behind and that is offensive,” Nita Chaudhary, co-founder of UltraViolet, a women’s rights group, told the AP.

MONEY stocks

How Netflix Plans to Grow Its Profits

2015 Summer TCA Tour - Day 1
Frederick M. Brown—Getty Images Netflix VP of Product Innovation Todd Yellin speaks onstage during the Your Netflix discussion at the Netflix portion of the 2015 Summer TCA Tour at The Beverly Hilton Hotel on July 28, 2015 in Beverly Hills, California.

Making sense of the streaming company's bullish valuation.

With Netflix NETFLIX INC. NFLX -0.03% stock seemingly hitting new highs every day, soaring about 85% in the past six months alone, it’s a good time to take a look at the company’s underlying business. Getting a better understanding of the potential for Netflix’s business to grow in the future can help investors see whether or not the stock is getting ahead of itself or not.

Looking at Netflix’s U.S. market
Most important to Netflix’s business today, of course, is the company’s U.S. streaming business. Forty-two of its 65 million members are based in the U.S. Likewise, more than half of its revenue comes from the U.S.

What sort of growth is Netflix’s U.S. market poised to serve up? Given management’s targets for 60 million to 90 million customers in the U.S. by 2020, as well as plans to average a 5% annual increase in prices, the company’s U.S. annual revenue in 2020 could be around $8.1 billion — or about triple the market’s current annualized revenue run rate of $4.1 billion. Not bad.

But here’s where the real growth comes in: Netflix also plans to be more profitable by 2020. “The US contribution margin structure we have chosen is to grow content spending plus marketing slightly slower than we grow revenue, increasing our contribution margin to 40% by 2020,” management explained in its Long-Term View letter on its website.

This contribution margin target is well ahead of the company’s 17% contribution margin today. A rapidly improving contribution margin will leverage the impact of Netflix’s rising revenue on its contribution profit.

Applying a 40% contribution margin to an estimated $8.1 billion in annual revenue from its U.S. market by 2020, Netflix’s annualized contribution profit would be about $3.2 billion. This figure handily eclipses Netflix’s annualized gross profit run rate of $1.4 billion today.

So far, the company’s goal for a contribution margin for its U.S. business of 40% by 2020 is looking realistic. Thanks to the company’s stronger-than-expected revenue and lower-than-expected content and other streaming costs, Netflix is actually ahead of schedule. It’s possible that the company could eventually raise its contribution margin target even higher.

Add in international markets
Once you mix in international markets, there’s plenty more opportunity for growth in Netflix’s underlying business. Its contribution margin in most of its international markets likely won’t be at 40% in 2020, but Netflix won’t need its international contribution margin to equal its domestic margin for the segment to begin contributing meaningfully to its business.

With plans next year to expand to China, as well as nearly every country on earth, it’s likely that Netflix’s total international revenue will be well ahead of its U.S. revenue by 2020. A smaller contribution margin on higher revenue, therefore, could mean that Netflix’s international contribution profit would rival its U.S. contribution profit.

Assuming Netflix’s total contribution profit from international revenue comes close to its U.S. contribution profit by 2020, and also forecasting approximately two-thirds of this contribution profit to make it to the company’s bottom line, the company’s market capitalization of $53.4 billion today begins to sound somewhat reasonable. Essentially, these forecasts would mean Netflix is currently trading at 12.4 times a 2025 annual earnings estimate.

While this exercise is too simple to count as a full-out buy, sell, or hold analysis, it at least shows that there’s some reason behind the stock’s bullish valuation.

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TIME Television

Netflix’s Most Expensive Drama Ever Recreates Life of Queen Elizabeth II

Queen Elizabeth birthday
John D McHugh—AFP/Getty Images Queen Elizabeth II leaves St Paul's Cathedral in London after a service of thanksgiving in honor of her official 80th birthday in June 2006.

The tagline: “Two houses, two courts, one crown.”

Netflix is putting £100 million ($156,814,000) into an original series about the Queen, Telegraph reports.

The series, which will be called The Crown, will be the most expensive show made by Netflix and the first to be filmed in the U.K. It will follow her life story in 60 episodes over 6 seasons from her wedding day in 1947 until today.

Claire Foy, known for playing Anne Boleyn in Wolf Hall, will play Queen Elizabeth in the first two seasons. At that point, producers will have to decide whether or not to replace her as her character ages.

After Downton Abbey’s raging success, Netflix is likely hoping that this will be the show to finally win a major Emmy. It’s two most popular shows last year, House of Cards and Orange is the New Black, only won in the technical “Creative Arts” categories.

The Crown has been described as “the inside story of two of the most famous addresses in the world – Buckingham Palace and 10 Downing Street – and the intrigues, love lives and machinations behind the great events that shaped the second half of the 20th century.”

It is due to air starting next year.

This article originally appeared on Fortune.com

TIME Media

This Is Why HBO Really Wants Sesame Street

It's all about taking on Netflix

HBO is mostly known for its high-minded dramas like Game of Thrones and cynical comedies like Silicon Valley. But Thursday’s announcement that the cable network is licensing five seasons’ worth of perennial kids’ favorite Sesame Street illustrates how badly the network needs children’s programming, too.

HBO will be the new first-stop home for Big Bird and co., with Sesame Workshop expanding their seasons from 18 episodes to 35. It will also produce a spinoff series as well as a brand new original series. All the episodes of classic Sesame Street will continue to appear on public broadcaster PBS nine months after their HBO debut.

Why does HBO want Cookie Monster and Elmo so badly? It’s all about Internet-based TV. Though HBO is still predominantly a cable network, the Sesame Street deal is really about securing the channel’s future as a streaming destination. The newly launched HBO Now, which lets users buy HBO without a cable subscription, is competing directly with streaming mainstays like Netflix and Amazon Prime Instant Video. And those services figured out long ago that hooking kids is key to growing their subscriber bases.

In 2012, Netflix inked an estimated $300-million-per-year deal for first-run rights to Disney movies starting next year, which will give the streaming service access to a trove of high-profile animated releases. In 2013, the company signed a deal with Dreamworks for 300 hours of original kids’ programming. These efforts have already paid off. Last fall, Netflix said that more than 75 of its kids’ shows had attracted more than 2 million viewers, with more than a dozen attracting at least 5 million viewers in the U.S.

Amazon has similarly made big investments in kids’ content on Prime Instant Video. Half of the company’s original programs are for kids, and its multiyear deal for programming from Viacom was driven by Amazon’s desire for children’s shows from Nickelodeon and Nick Jr. “The data shows that when you put compelling kids’ content on the service, it helps us acquire more Prime members,” Brad Beale, the director of content acquisition for Amazon Digital Video, told TIME after that deal.

Kids’ shows are a solid investment for many reasons. Children tend to rewatch shows repeatedly, meaning a service can get a lot of mileage out of a single program. They also have no preconceptions about the “right” way to watch TV. Sesame Workshop chief Jeff Dunn told the Wall Street Journal that two-thirds of the show’s child viewers first see Sesame Street through a streaming service or video-on-demand now. Overall, kids aged two to 11 are watching about eight hours of Internet video per month in 2015, according to Nielsen, up from 4.5 hours in early 2013.

By adding Sesame Street to its lineup, HBO is showing it thinks its brand appeal can stretch beyond adults craving premium, high-budget TV. With kids being such an essential part of competing streaming service’s lineup, expect more deals that appeal to the youngest television fans in the future.

Read next: How the Internet Had Fun With Sesame Street Moving to HBO

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TIME Television

Watch the Trailer for Demetri Martin’s Netflix Special Live (At the Time)

This is Martin's second special

Demetri Martin is wondering how bad a guess has to be to be considered “uneducated.” “ ‘Do you know the temperature outside?’” he says in an exclusive trailer from his upcoming Netflix special, Demetri Martin: Live (At the Time). “ ‘Uh, carrots?’”

Demetri Martin: Live will join multiple other Netflix-exclusive comedy specials, including Aziz Ansari: Live at Madison Garden and Chelsea Peretti: One of the Greats. This marks his second special: His first, Demetri Martin. Person., first aired on Comedy Central in 2007.

Watch the trailer above, and see the full special when it debuts on Netflix Friday.

This article originally appeared on EW.com

TIME Research

Why Netflix’s Parental Leave Policy is Good For Babies

How does unlimited maternity and paternity leave help babies?

On Tuesday, video-streaming company Netflix announced it would be offering its employees a year of maternity and paternity leave during the first year after their child’s birth or adoption. It’s a progressive move that got us wondering: What effect will it have on babies?

Though the specific effects of parental presence on children is not fully understood, there’s plenty of research on the importance of early parent-infant bonds for successful development. “We have decades of research that tells us how important it is that a bond is established between parents and young children beginning at birth,” says Dr. Jack P. Shonkoff, director of the Center on the Developing Child at Harvard University. “The need for time to form secure attachments is critically important. It’s one of the most important things you can do to build a foundation for a lifetime of healthy development.”

The first year of life is also full of milestones for infants. According to the U.S. Centers for Disease Control and Prevention (CDC), during a baby’s first year of life they learn to focus their vision and are at the very earliest stages of language development. “The way parents cuddle, hold, and play with their baby will set the basis for how they will interact with them and others,” the CDC says.

“Babies need a sense of safety, predictability and responsiveness. We know from research that all areas of development—whether it’s cognitive development, emotional wellbeing, or social development—has its foundation in this secure relationship,” says Shonkoff. He adds: “We do a lousy job as a society supporting parents after the birth of their babies. It’s unconscionable with all the deep scientific understanding we have now. It makes no sense to not offer more of that flexibility and support.”

Then there is breastfeeding, which, if mother chooses to practice, is far easier to do if she is at home with her infant. Not surprisingly, a 2011 study found that women who took longer maternity leaves also breastfed for longer. The American Academy of Pediatrics recommends babies be exclusively breastfed for the first 6 months of life. After the first 6 months and until the infant is 1, the baby should continue to be breastfed while solid food is introduced as long as it is mutually desired by the mother and child, according to the AAP.

“Netflix is not a random sample of the U.S. population, but that said, my findings do suggest that having extra time at home can be beneficial for a child’s health,” says Maya Rossin-Slater, an assistant professor in the department of economics at University of California, Santa Barbara.

Still, according to Rossin-Slater, other data suggests that when employees go from already having a lot of paid leave to having more of it, the positive effect for kids is not as dramatic has going from zero paid leave to more. “Generally the consensus is when you extend leave from already pretty generous benchmarks to more generous bench mark there’s not much benefit for children,” she says. What this means for Netflix employees is yet to be seen.

And of course, the benefits to both parent and child will vary, to a certain extent, from family to family. “A parent who is home all the time and miserable isn’t good for the child either. What’s key, and what’s important about what Netflix is doing, is it’s giving parents the choice,” says Shonkoff.

TIME parental leave

Microsoft Follows Netflix In Expanding Parental Leave Policy

Microsoft adds additional time time off, but doesn't quite match Netflix's unlimited leave policy.

Tuesday was a big day for Netflix’s employees planning to become parents: they got unlimited paid leave for the first year of their new child’s life.

On Wednesday, Microsoft announced its own extension of its parental leave, which takes effect on November 1. Previously, it provided eight weeks of fully paid maternity leave and 12 weeks of parental leave for all parents, eight of which were paid, and four were not.

Now, all 12 of those weeks will be paid, and mothers get a total of 20 weeks. Mothers can now also take up to two weeks of leave before the end of their pregnancy “to manage the physical impact that often comes with late pregnancy and to prepare for the upcoming birth,” the company writes.

Microsoft will also let parents choose if they want to take their leave all at once, or split into two chunks, and they’ll also be able to ease back to work on a part-time basis.

In the same breath, Microsoft also added a couple of additional company holidays, as well as increased 401(k) matching for its employees, beginning on January 1, 2016. It noted that employees in its retail locations will be getting some similar new benefits, though it’s unclear as to what those will be exactly.

But while it’s encouraging to see more companies acknowledging that many of their employees will want to have families and will need time and resources in order to do that, the discrepancy between allowances for mothers and fathers is a bit disappointing. Surely, new mothers would appreciate help with middle-of-the-night care for as long as possible.

TIME Careers

Netflix Announced a Game-Changing Parental Leave Policy

This is huge for new parents

Netflix announced Tuesday that it’s allowing employees to take unlimited maternity or paternity leave during the first year after their child’s birth or adoption.

During that first year, Netflix employees will be able to take off however long they feel they need to. They can return on a full- or part-time basis, and even take subsequent time off later in the year if needed. Netflix will “keep paying them normally,” eliminating the hassle of having to switch to disability leave, the company says.

Netflix’s policy deserves high marks for extending leave to fathers, as well as understanding that the entire first year after childbirth can be challenging for new parents. But it should be noted that unlimited time off policies can have their pitfalls. Many tech companies, including Netflix, offer unlimited paid vacation time. That can be great for employees taking long trips, but it also means employees have to work with their managers and teams ahead of time to make sure their absence won’t jeopardize a project or deadline. Extended absences can also strain workplace relations.

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