Streaming platform Netflix announced its first-quarter 2024 earnings in mid-April. According to the financial report, Netflix's revenue in the quarter was $9.4 billion and the operating profit was $2.6 billion, both of which increased significantly from the same period last year. Revenue is expected to grow 16% in the second quarter, with a lower net growth rate of paying subscribers due to seasonality, but revenue will grow by 13%-15% for the full year.
The financial report also showed that Netflix added 9.3 million new subscribers in the first quarter of 2024. Up to now, the company has 269.6 million users worldwide, further expanding its leading position in the industry. In recent quarters, Netflix has been able to add millions of subscribers every quarter, including 13 million in the fourth quarter of last year.
Netflix confirmed in its earnings report that it will stop disclosing the number of subscribers and average revenue per user starting in 2025.
The growth in the number of subscribers was the main factor that continued to push up Netflix's market capitalization. Since the launch of the Netflix streaming platform, the number of users has been on the rise, and the stock price has continued to rise as a result. Netflix's continued subscriber growth has made Netflix more ambitious, not only increasing its investment in original content, but also expanding its service to more countries and regions to attract more users. With the release of Netflix's user data again and again, the doubts from Wall Street capital have disappeared, and competitors have rushed to catch up. Disney CEO Bob Iger even believes that the future of Disney and Hollywood as a whole is pinning its hopes on the development of streaming.
During the pandemic, the number of users of streaming platforms around the world skyrocketed, and Netflix's stock price soared above $700 in October 2021. As the impact of the epidemic gradually weakened, the high growth of users was obviously unsustainable, and Netflix's stock price began to decline after that, and the first quarter financial report released in April 2022 showed that the number of subscribers increased less than expected, and Netflix's stock price fell to about $160 at one point.
While Netflix shares have recently rebounded above $550, the company's co-CEOs Ted Sarandos and Greg Peters haven't forgotten the lessons of 2022. They have foreseen the future and hope to establish a new narrative to add imagination to the stock price.
Over the past year, Netflix has cracked down on passwords and account sharing, a measure that has led to significant user growth.
In addition, the pricing of membership tiers is very different from what it used to be. Greg Peters emphasized on the earnings call that "the company has made improvements to its pricing strategy and has developed a tiered plan that will vary in pricing for different countries and regions." In the future, Netflix's pricing will become more and more differentiated. In other words, Netflix used to have the same subscription price in all markets, and that strategy will change in the future. In some countries and regions, Netflix may reduce the cost of a subscription by increasing the amount of ads. Greg Peters concludes, "In the past, we used a simple algorithm to measure our business, which was the number of members multiplied by the monthly price, which was increasingly inaccurate in reflecting the state of the company's business. In the future, we will update our user data from time to time, especially when the number of users reaches a major milestone, but this data will not be a fixed part of our regular financial reporting. ”
In fact, keeping the number of users secret is a practice that Amazon has been doing for many years. The tech giant is secretive about the number of subscribers to its Prime Video, but every few years, Amazon goes on a hype when it reaches a certain level of bragging.
From its own point of view, Netflix also hopes that Wall Street will stop focusing on the number of users and focus on other metrics, such as operating income, operating profit and user activity.
Bank of America analyst Jessica Reeve Ehrlich believes that "while Netflix is not yet to worry about subscriber growth, the significant slowdown in subscriber growth in 2022 is still a 'ticking time bomb', which could be a harbinger of a slowdown in subscriber growth in the future." ”
In a letter to shareholders, Netflix also talked about its future plans to further expand its advertising business. The number of ad-supported users increased by 65% year-on-year in the first quarter, and the company's executives predict that the advertising business will be a significant contributor to profitability from 2025 onwards. Predictably, once ad revenue accounts for a percentage of total revenue, Netflix will start reporting ad revenue separately. As new and existing users continue to shift to subscription-supported memberships, Netflix's ad revenue is set to continue to rise.
Sarandos also spoke about the company's strategy in sports and live programming, "We are developing our own live or live programming, and although it is still in its early stages, it is an important part of the strategic expansion. ”
Sarandos also said that Netflix's current focus is on continued earnings growth, and the first key metric is to increase user activity, revenue and profits. If it finds an opportunity to advance these three areas, Netflix is willing to diversify into an increasingly diverse range of high-quality entertainment content.
Of course, Netflix hasn't forgotten to boast, proudly pointing out that the company is currently a leader in streaming, and declaring that it has more than 1 billion followers on social media and is confident in its marketing prowess, "Our most direct promotional tool is Netflix itself, which has become the platform of choice for many people when looking for entertainment." With hundreds of millions of trailer views on this platform, and the combination of influence, recommendation, and followers that is difficult to replicate, Netflix's ability to integrate stories into mainstream culture is something few can match. ”
As one of the biggest names in streaming, Netflix certainly knows how to tell a compelling story. But a year from now, when Netflix ends its crackdown on passwords and account sharing, subscriber growth is likely to slow or even decline again, and from then on, Netflix will need to tell a new story to Wall Street.
Submissions should be sent to: