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Netflix up 9.3m subs, focus switch to profit

April 19, 2024

Netflix added 9.3 million subscribers in Q1 2024, hugely surpassing analyst estimates, and now has 269.6 million subscribers globally, further asserting the company as the world’s leading streaming service.

Netflix reported revenue of $9.4 billion (€8.8bn), up 15 per cent YoY, and operating income of $2.6 billion.

The company advised that it will stop reporting subscriber numbers and average revenue per user (ARPU) from Q1 2025. Netflix already stopped offering quarterly paid membership guidance in 2023.

“Almost 270M households across 190+ countries now subscribe to Netflix,” company executives said in a letter to shareholders. “With more than two people per household on average, we have an audience of over half a billion people. No entertainment company has ever programmed at this scale and with this ambition before.”

Despite the positive figures, disappointing Q2 revenue guidance dragged Netflix stock down by more than 3 per cent in after-hours trading on April 19th.

Commenting on the results, Paolo Pescatore of PP Insight said: “Expectations are always high and the company did not disappoint. A cracking start to the new year and absolutely smashed net adds for the quarter. No matter the company’s attention to switch focus from subscribers to financials, net adds is the key metric that everyone wants to see. These latest results underline the company’s strategy to grow thanks to new initiatives such as cracking down on password sharing and ad tiers. There’s still plentiful opportunities for further growth.”

“The movement to no longer disclose quarterly subscriptions from next year will not go down well; more so given subs growth that the streaming king has seen over the last year. Subsequent quarters might be challenging due to seasonality; which typically underperforms compared to other quarters as people spend more time outside of the home,” Pescatore added.

Hunter Terry, Head of CTV at Lotame, a data collaboration platform, commented: “Netflix stock volatility is often correlated to subscriber growth. Netflix has seen a tremendous amount of growth in 2023, increasing from 2022 by about 30 million. We should not expect that level of growth to continue in Q1 2024. Recall that Q1 2023 only saw an increase of <2 million subscribers. Regardless of subscriptions, Netflix is doing everything it should at the moment and should be highly valued. It’s diversifying more into sports and gaming. Its password sharing crackdown was marketed more as an upsell opportunity for such account holders as opposed to outright derision. Netflix continues to find success in licensed content, lowering its overall production costs. It’s no surprise then that Netflix has and will continue to be the king of streaming (at least for now).”

“Moving forward, Netflix needs to continue doubling down on their $6.99 ad tier. Given the low cost of the tier, it has surprisingly taken longer than expected to gain as many ad tier subscribers as it has (23 million as of January 2024 since the launch in Q4 2022). Weirdly, Amazon might be key to Netflix gaining even more ad-based subscribers. With Amazon switching on ads to 100 million+ Prime Video watchers overnight, these customers — many have been no-ad viewers on all their streaming services — are seeing firsthand how minimal ad disruption can be to their overall viewing experience. I believe that this is going to lead to an influx of ad-tier subscriptions to not only Netflix but the other large subscription-first streaming services such as Disney+, Max, and Paramount+. Wall Street might want to see more subscribers overall for Netflix, but as the preeminent streaming service in terms of revenue and profitability, it will take a large act to relegate Netflix from its throne,” added Terry.

Ateliere founder and CEO Dan Goman, offered: “Anticipations for Netflix’s Q1 earnings were high, and the streaming giant delivered. With a strong start to 2024, adding 9 million new subscribers in Q1 (bringing total subs to 270 million) and a notable uptick in ad-tier adoption, Netflix continues to prove it’s still the frontrunner in the streaming wars, with no loss of momentum. Early on, Netflix invested in a modern, cloud native technology infrastructure, which allows it to swiftly adapt to emerging monetisation opportunities. This strategic investment is now yielding significant benefits in the rapidly changing content industry.”

“New, original shows like Avatar: The Last Airbender (pictured), which quickly topped viewership charts, and the much-anticipated return of Bridgerton, showcase Netflix’s strong content advantage. Its diverse, engaging content not only continues to garner critical acclaim – recently securing multiple award nominations – but also significant audience interest. With the second quarter already underway, its stacked lineup of future releases will only bolster the company’s performance. While Netflix’s content continues to receive nominations for industry awards, the streamer has no plans to shift its focus to big-screen blockbusters. Under the stewardship of their new film chief, Dan Lin, the strategy is aimed to reel in spending, prioritising quality and innovative storytelling over star-studded casts in order to appeal to an array of subscriber interests.”

“Entering the live sports arena, Netflix is making strategic moves by adding live sports content to its lineup, potentially attracting a different demographic of viewers. Netflix’s deal with WWE, which has a highly engaged and loyal fan base, taps into this established audience, providing them with more reasons to choose or stick with Netflix over other platforms that don’t offer wrestling content. One of the more highly anticipated programs, featuring a boxing match between Jake Paul and Mike Tyson, will also be a first for the streamer and could help Netflix capture the “event television” market, which includes live sports and specials that typically draw large audiences in real-time.  The pioneer of streaming isn’t alone, however – Disney+ and Hulu are taking measures to keep up with Netflix, including ad-tier subscriptions, password sharing restrictions, and bundling. Additionally, ESPN, Fox and Warner Bros Discovery, three of the biggest programming players in sports, signed a deal to create one cohesive streaming platform to host all their content, showcasing sports’ continuing growth beyond cable. As we continue to move away from traditional cable and towards streaming, we’ll need to keep an eye on how competitors are battling the giant and staking their claim in the industry,” concluded Goman.

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