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Netflix adds 13.1M subscribers, tops revenue estimates as membership push gains steam
Source: CNBC
January 23rd, 2024
Summary: New subscribers, ads, price increases, and a password crackdown helped Netflix beat analysts’ expectations for revenue and subscribers in Q4 and 2023. Here are the top-line results:
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Netflix reached a record 260.8M paid subscribers, including 13.1M added in Q4, easily beating analysts’ estimates.
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Q4 revenue was up 12.5% to $8.83B, beating estimates. Full-year 2023 revenue was up 6.6% to $33.7B.
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Netflix has 23M global monthly active users in its ad-supported tier, up from 15M in November. About 40% of new sign-ups choose ads.
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Netflix will end its $11.99-per-month ad-free plan in Canada and the UK; it discontinued the plan last year for US subscribers.
Netflix stock is up 9% in after hours trading.
Netflix is also making its most ambitious move into live entertainment with a $5B deal with WWE's Monday Night Raw. Netflix will stream the live weekly show for 10 years, with the option to quit the contract after five years. USA Network has been airing Monday Night Raw until now in a deal worth $250M-$260M with NBCUniversal. So, WWE is essentially doubling its revenue. Netflix's ad-free subscribers won't see ads during the show's commercial breaks.
It was only in November that Netflix streamed its first live sportscast of a golf competition. Next, it will stream a live match between Spanish tennis stars Rafael Nadal and Carlos Alcaraz in March.
Deal Grades:
WWE: A
Netflix: B
Opinion: As studio-produced content becomes increasingly commoditized, and consumers regularly switch between streaming services to watch movies and TV shows on demand, the next big frontier for streaming services to differentiate is live events. Streaming live events will also help them accelerate the shift of consumer viewing from linear to digital (and shift the ad dollars from linear to digital). It’s why Amazon went out and got the rights for Thursday Night Football.
For content creators like WWE, it’s all about who has the most eyeballs and will cut the biggest checks. In the past, that was broadcasters and cable cos. As those companies struggle, it’s slowly becoming the big streamers and big tech. This partnership is a bit of an odd fit from a brand alignment perspective ("wrestling and chill" doesn't feel quite right), but perhaps that’s the point; WWE brings new viewers to Netflix, and Netflix brings new viewers to WWE.
For Netflix, it makes a ton of sense to jump into live streaming. It is dealing with an array of new competitors who are vying for consumer attention on smart TVs aside from traditional on-demand streaming services: FAST Channels (The Roku Channel, PlutoTV), vMVPDs (YouTubeTV, Sling), TVOD services (iTunes, Google Play Store), and more. In the last year, Netflix has demonstrated a willingness to evolve (launching ads was a major philosophical shift and getting into gaming represents new territory); it realizes it has to evolve to protect its business and grow. That said, this deal is risky because the investment is signficant. Netflix is likely overpaying to get a first-mover advantage. It’s unclear if the math will work out for the company long-term.
Big picture, digital advertising will benefit majorly from the shift of live events to streaming. Live television has been a major choke point for the migration of dollars from linear to streaming. This will open the floodgates by creating more streaming ad supply and generating more demand. Expect more of these types of deals!
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