How Netflix is Winning the Streaming Wars
Netflix posted a 15% rise in revenues in the third quarter to $9.8bn, slightly ahead of expectations, while subscriber numbers rose despite production delays by last year’s Hollywood strikes.
Netflix added 5.1m subscribers in the third quarter, beating Wall Street estimates by more than 1 million users, sending shares sharply higher.
Investors had expected Netflix to sign up 4m subscribers in the three-month period to the end of September.
For the full year of 2024, Netflix expects revenue growth of 15% — the high end of its forecast range
By the end of the year, the company thinks it will have generated $8.7bn in profit.
Not bad for a company that was notorious for incinerating cash by taking on billions in debt.
This year, Netflix tightened up the use of password sharing but analysts have questioned when that effect will tail off. Yes, subscriber growth outpaced expectations in the third quarter but it was still significantly lower than in the same quarter last year.
New programming during the quarter included murder-mystery The Perfect Couple; Kaos, a modern take on Greek mythology; and the romantic comedy Nobody Wants This.
How Netflix is growing market share
Live sports events
Netflix is investing heavily in live sporting events such as WWE’s Monday Night Raw and NFL American football holiday games, with such live-streamed content seen as providing an “appointment to view” for subscribers and differentiating it from rival streamers in the pursuit of new viewers. It will live-stream the Mike Tyson/Jake Paul boxing match, as well as two NFL American football games on Christmas Day.
Crackdown on password sharing
A crackdown on password-sharing has boosted income. While the password sharing crackdown initially led to significant subscriber gains, the growth rate has begun to slow. Although Netflix added 5.1m subscribers in the third quarter, this is still a 42% decline from the same time last year. This slowdown indicates that the impact of the password sharing crackdown is starting to stabilise.
It now carries advertising
Netflix has introduced lower-priced tiers of subscription where programming comes with advertising. In the third quarter, the research company Antenna reported that Netflix added more than 1.9 million subscribers to its ad-supported service. Netflix said that membership with ads was up more than a third quarter on quarter but it had “much more work to do improving our offering for advertisers, which will be a priority over the next few years”. It does not expect advertising to become a primary growth driver until 2026.
Who’s winning the streaming wars?
According to Parrot Analytics, Netflix overtook a legacy Hollywood studio in the US for the first time in the third quarter in terms of demand for original programming. The streaming giant had 9.6% share of the market for TV content produced under a company’s corporate umbrella, leapfrogging over NBCUniversal, which came in fifth place with a 9% share.
And Netflix is a much bigger beast in the competitive streaming market than rivals such as Apple+, Disney+ and Amazon Prime. But the other streamers have a more targeted, deeper approach, whether it is Apple+’s focus on high-end drama (Slow Horses, Ted Lasso) or Disney’s ownership of the Star Wars and Marvel franchises.
While new subscriber growth was at its slowest for six quarters, Netflix remains the leader in a competitive streaming market vying for share with deep-pocketed rivals such as Amazon Prime, Apple+ and Disney+.
Netflix may have won this quarter’s streaming battle but the streaming wars are far from over.
Or as Forrester research director Mike Proulx told The Times, for long-term growth, Netflix must demonstrate that its ad solutions can scale, reach the right audiences and ultimately deliver tangible results to brands, more so than its competition.
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