Netflix co-CEO: “Advertisers want engagement most of all”
June 5, 2024
Netflix co-CEO Greg Peters, speaking at the Deloitte and Enders Analysis Media & Telecoms 2024 and Beyond Conference, said there was a $600 billion+ revenue opportunity for the streaming platform, and that advertising plays a key role in acheiving that.
“Adaptability is about diversifying our revenue through ads, which are such a great complement to our subscription business,” he explained. “Most importantly, ads enables us to offer lower starting prices — £4.99 a month here in the UK, with two streams, HD video and downloads. That means more people can enjoy all of those films, series, games and events […] not only does engagement drive acquisition, retention and willingness to pay — but it’s also what advertisers want most of all”.
He continued: “These are big bets for Netflix. And we have years of work ahead of us to meet our aspirations in these areas, which will almost certainly broaden as we continue to build and learn more. But if we can execute well on them and continue to improve our core member experience, we have so much more room to grow”.
Peters added: “Taken together, pay-TV, film, games and branded advertising are a $600 billion+ revenue opportunity — and today Netflix accounts for less than 10 per cent of total TV time and less than 6 per cent of that revenue. But it all starts with the consumer. Our members don’t care about total TV time, revenue or profit. They’re focused on one thing: will they find something great to watch on Netflix next time they turn it on? And if they do, people will come back night after night. They will be thrilled, and we’ll have a wildly successful business. It really is that simple — and it really is that hard”.
Since the Netflix platform went global in 2016, Peter revealed that Netflix has
- Invested heavily in its slate — with spending on content up roughly 2.5X from nearly $7 billion in 2016 to ~$17 billion this year alone;
- While also steadily increasing its operating margins — up more than 6X, from ~4 per cent to ~25 per cent over the same period; and
- Growing free cash flow — from negative ~$2 billion in 2016 to approximately $6 billion in 2024 alone.
Peters asked: “So what are the big lessons we learned over the last 10 years, and what does the future hold?”
“Our key learning — which I believe is now pretty widely accepted across the industry — is that success in streaming starts with engagement. It’s the best proxy for consumer happiness. And in a subscription business, when people watch more, they’re more likely to stick around, more likely to recommend Netflix to their friends, and they place a higher value on the service. Today, over 270 million households across 190 countries use Netflix. If you assume over 2 people per household — which is conservative — that number is well over half a billion people,” he said.
Speaking on the amount of content available to Netflix subscribers, Peters said: “People often ask why we make so many shows and movies? Do we really need them all? All the evidence we have suggests the answer is ‘yes’. To satisfy our audience of over half a billion people, we need lots of great stories that appeal to lots of different tastes. No entertainment company has ever programmed with this ambition before. It’s why we continue to invest in our slate, even as competitors are pulling back. And by great, I mean films and TV shows our members love. It’s an audience-centric approach to quality. Because audiences today care as much about authenticity and originality as critical acclaim.”
“Now you may be thinking it’s impossible to make so many movies, TV shows or games, and make them great. And if one person was making every decision, that would be true. But we aren’t relying on a single tastemaker! All of this happens in small, tightly knit, creative groups led by executives with long track records and a huge passion for what they do — like Anne Mensah here in the UK. It’s their job to understand our audiences, and program for them. Data can help, but programming is an art, not science. No algorithm could have told you that a series set in Wales from a first time showrunner featuring a therapist’s son giving sex education lessons to his schoolmates would be a hit. If it were as simple as more data or the best algorithms, we’d have no flops. But we do — because TV and film are quintessentially human endeavours, with all the success and failure that entails. All Quiet on the Western Front, Top Boy and Sex Education were all beloved by audiences because a creative executive saw something that was bold and distinct,” he explained.
Peters also took the time to celebrate the success of recent UK productions.
“Just look at the UK,” said Peters. “Our team here have been on quite the roll […] from Beckham, Heartstopper, Top Boy and The Crown in 2023 to […] Fool Me Once, One Day, The Gentleman, Scoop and Baby Reindeer in 2024. And we’re only half way through the year! These series and films are so diverse — and an amazing testament to the strength of British talent and storytelling”.