Behind The Numbers: Netflix Breaks Records: Can Its Playbook Be Replicated? | Jan 31, 2025
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Hey gang, it's Friday, January 31st. Paul and listeners, welcome to Behind the Numbers, an eMarketer video podcast. I'm Marcus, and today we'll be discussing consumers' new streaming price ceiling and Netflix's new playbook. Today I'm joined by our vice president, based in the land of good lobster rolls, is Paul Verner.

Thanks Marcus, thanks for having me and yes, I am staying right now at a place that's like a very short walk from one of the best lobster roll places in town. I hate you. Today's fact: the first Disney movie was... Ooh, I should know this, but I don't. Snow White. Really? Yeah, came out in 1937, which was the tail end of the Great Depression, not recession,

Depression. So if Snow White the movie was a person, they would be 88 years old. I would have thought it would be like a Mickey Mouse cartoon or something like that, but I guess that wouldn't be a movie, that would be a short. Yes, yeah, exactly. Um...

The story of Snow White originated from a German fairy tale written by Jacob and Wilhelm Grimm and published in 1812. Walt Disney chose Snow White as his first animated feature film because he was familiar with the story after seeing a silent film version in 1916 as a teenager. Today's real topic, how Netflix broke a bunch of records and if its new playbook is replicable.

All right, Paul, we're talking Netflix first, and then from there we will pivot into streaming more broadly. But Netflix broke a bunch of records. What records did it break? Number one, Netflix added more subscribers in Q4 than any other quarter in its 22-year history, adding 19 million in Q4. That's double what was expected by Wall Street, and it's 44% more subscribers than they added last.

Last Q4. Those are rocket ship startup numbers. So Netflix now has over 300 million subscribers worldwide. Record number two, Netflix's stock hit a record high after reporting these gaudy subscriber numbers. And record number three,

Netflix crossed the $10 billion mark for revenue in a single quarter for the first time ever. Its four-year revenue growth was nearly as fast as the pandemic-fueled 2021 growth. So, Paul, we're playing Slice of Pie to kick off the episode. I've asked you to create a pie chart as to the reasons 3Macs...

Although I said three Macs, I don't have three Macs. So let's scratch that to the reasons, as many reasons as you want, why Netflix had such a record-breaking Q4. Well, because you did say three, I'm going to keep it to three. And that's fine, because I think the three make sense. And they are in equal parts of 33 and a third percent each. Convenient. The NFL, the NFL, and the NFL. Really? Yeah.

I'm exaggerating, Marcus. I was just trying to be provocative. I think the NFL is a huge part of the story, but realistically, I'm going to say maybe like as far as the fourth quarter, maybe I'm going to say like 60% NFL and the remaining 40 would be like maybe half and half. So 20% other NFL.

other companies license content. So part of what I think their strategy is now. And the other 20% is their own entertainment content. They continue to have some of the most popular shows

A lot of these shows are in advanced seasons, so there's like, they built an audience for these shows. So I think they had an early start with original programming and they hit the nail on the head with a lot of their, you know, some of their top shows like Wednesday and Stranger Things and Bridgerton and, you know, right down the line. So, yeah.

Yeah, so that's my breakdown. Okay. We're quite similar in that regard because I had 45%, you had 40, I think, people joining Netflix because of its existing content. Whatever was there before, what people joined because of that.

very reason that they joined in the past. Then the rest of it, so 55% left, I went, I'll go in order of size of share, 20% Jake Paul and Mike Tyson fight, which I wasn't going to. That drew a record-breaking audience with 108 million live views worldwide.

However, research company antenna said that that fight drove 1.4 million new subscribers, which was twice as many. Yeah, almost twice as many as the 15% of the pie, which I'm giving to the Christmas NFL games. Their audience was about 30 million global viewers. Most stream football games in history.

And that's about a third of what the Super Bowl pulls in. So it's a lot. But Antenna said that Netflix drove over 650,000 new subscribers in the days surrounding the NFL game. So I went 20% for the fight, 15% for the NFL. And then I went 15% folks signing up to watch Squid Games.

season of Squid Game games who knows season two people probably know but I'm not one of those people less so this it doesn't seem like it's much of a big deal but less than a month after it released season two 153 million views on Netflix becoming its third most watched series Squid Game season one was the most watched way ahead 265 million Wednesday was a close second

But Squid Game season two does hold the record for the most viewers in the first three days. So that was impressive. And then I went 5% for wrestling fans signing up as the WWE Raw gets ready to hit Netflix in January. That pulls in a couple of million people per episode. So I told you to do three and then I didn't do three. So I kind of cheated. But that's my breakdown. What do you think? Yeah, I mean, you could still think of it as three with breakdowns, you know, inside of them. Or maybe you have two with a lot of breakdowns.

Yeah. I hadn't seen the data that you cited on Jake Paul versus NFL, but that surprised me a lot as well. Yeah. Because I would have thought that those NFL Christmas games, which were exclusive to Netflix, would have driven more of a spike in subscribers. I still think that the association with the NFL brand...

if Netflix continues it, which I'm sure they will, is going to pay off down the road. The Jake Paul, Mike Tyson fight was a bit of a one-off. Yep. Not that Netflix can't and won't do isolated, you know, high-profile live events. They probably will. I think, though, the larger picture here is sports. And that's one of the differentiators now with streaming. Really, I mean, I say differentiator. I guess I mean more that...

Sports has always been sort of like the vestige of the traditional cable bundle. And up until a few years ago, we could reasonably still say that it was what was holding that business together. I think so much has peeled off. So many valuable sports licenses have peeled off of traditional TV and gone over to streaming that...

When it comes to Netflix, they are late to this party because some of their big competitors like the tech players like Amazon and Apple, not to mention the hybrid traditional digital media companies like Disney and NBCU.

They were onto live sports on streaming quite a while ago. This was one of the things, along with advertising, that Netflix said it wouldn't do. And we know how that story turned out for both advertising and sports. But I think the arrival of sports and what it allows these companies to do in terms of just

grabbing more viewership and grabbing repeat viewers because sports fans are loyal and you know it's it's usually seasonal but if you play your cards right you can be a streaming service for all seasons with sports so you know i think netflix is is in that game to win um as evidenced by what we already talked about and plus you know their licensing of the women's fifa world cup and other things down the line um and to to your point earlier i think that

the NFL brand is going to be more of a driver than these one-off events because it's the most popular sport in the country, number one. But it's also interesting because we're talking about whether people can replicate Amazon's playbook. Netflix has taken a page out of Amazon's playbook. And Dan Shanoff and Andrew Marchand

of the athletic uh had a great piece they were noticing that netflix wanted to test whether it could convince fans to jump from traditional nfl broadcasting platforms to stream games on on netflix understanding that amazon's prime video uh thursday night football had proved the concept interestingly uh netflix has the rights to do christmas day games again in 2025 and given that

December 25th, Christmas Day is on a Thursday. They'll be airing the same time as the Amazon Prime video games as well. The sports rights thing is interesting because other people have other platforms have locked up the rights for those.

But maybe Netflix does eventually get into the sports right business. The Athletic article was noting that Netflix is a natural top bidder for a new package of NFL games, whether this is a new 18th game, the 17 games in the season, 18 weeks, maybe a new 18th game package, an international package or something brand new like the NFL on Christmas Day, which used to be the NBA's thing.

um so in a few years you know netflix's bargaining position will be a lot lot stronger for sports rights just because of a sheer audience size the company was saying including extra member accounts poor their worldwide audience is estimated to exceed 700 million people and so leagues might need netflix leagues might need netflix more than netflix needs them yes all good points the international angle i think is super interesting because that is what

gives streaming services that can license in a lot of countries, and Amazon and Apple and Netflix have all done this. It gives them a much wider audience than a media company that's just licensing for broadcast or even for streaming within certain territories. So I think that is a huge factor, and it gives Netflix an advantage over everyone else. And I think also that...

Certainly, continuing association with the NFL is going to help them. This is a long game by virtue of the fact that, like you said, the licenses tend to be very long terms, like 10 years with the major US sports leagues. So it's not like rights are going to come up for renewal in the very near future. So companies that do this, like Amazon and Netflix and Apple on the tech side,

I think they have to be willing to play that long game. But I know we do an episode where we do predictions like six months out. I'm going to make a very, very long-term prediction like, say, 12 years out. Oh, okay. It's a bit far. I won't be here. It is, but you'll be here. So will I. Probably.

I can see a major, major sports property like the Olympics happening.

going to a Netflix or an Amazon when, you know, whenever it comes up for renewal. I know NBCU has had a lock on it for decades. Yeah. But I could certainly see that happening as... With this audience size. Yeah. Yeah. Yeah. With the, you know, the global audience. The brand. And the brand. And, you know, let's face it, Netflix now has the kind of brand loyalty that

that a lot of people associate with things like sports. It is the default. It has the early mover advantage. They've never had the kinds of major issues that some other media companies have had. Yes, they've had their down quarters, they've pivoted many times, but

They are a very liked and trusted brand. And I think, you know, that that's just going to keep carrying over for them. Yeah, that's a that's a great take. And I really love the take that you made. It was a week or two ago, we were talking a bit about Netflix. And you also saying they are primed to be bidding for the UFC.

Yes. Yeah, that is one of those. I mean, I wouldn't put it obviously on the level of NFL or NBA, but yeah, I mean, that is a major sports...

property that is going to come up for renewal this year yeah yeah and um as i mentioned before wwe now raw moved to netflix um this year wwe and the ufc share a parent company tko holdings espn uh has the rights exclusive rights to to the ufc uh through next year but sources told that the athletic that the ufc will consider splitting the packages between multiple carriers so

We could certainly see that. So Paul, I wonder what you think of this concept because Netflix today, given everything we've said, it kind of feels like Spotify's early days of pivoting away from a music only brand and more towards podcasts, audiobooks and music and trying to become the audio app.

When you went on Spotify, you knew everything was there, but it wasn't brilliantly organized when they were trying to make this pivot. Now it's a bit better. Netflix feels the same. It has movies, TV shows, games, and now it has live singular events, NFL games. It has live episodic events like WWE. Do you think Netflix can become an entertainment hub? And do you think that that is replicable by other big streaming platforms?

I think in some ways it is an entertainment hub only because it's done a great job of incorporating all of its original programming and emphasizing it, but they still license a lot of other programming from other parties, some of which are having a tough time trying to be Netflix, and they've kind of...

accepted the fact that it's better for them to sell product to Netflix. I think one of the X factors with Netflix is, no pun intended, is gaming because it's an area that they've dabbled in a lot, but they've never really incorporated it. To your point about the, I think the Spotify analogy is a good one.

I think Netflix could do something like that around gaming where it's more part of the whole experience of Netflix

The other part that they really haven't dug into is creator content. And that could be an area where they could actually encroach on YouTube and TikTok and Instagram. I don't know that they have any plans to do that whatsoever. But when I think of the spectrum of video programming and what moves the needle, particularly for younger audiences, that would be something that I

I would think on some level they're at least considering. Yeah. Yeah. That's a, that's a fascinating, um,

And I mean, go back to the creator side of things. Go back to gaming for a second. Co-CEO Ted Sarandos was saying that they'll be introducing party and couch co-op games on the TV delivered from the cloud. They're thinking of them, they say, as a successor to the family board game night or an evolution of the game show on TV and what that used to be. But to your point,

Netflix, I mean, they've done so well. Their competitors, other streaming platforms, they've not been able to replicate what Netflix has done thus far. Disney and Warner Brothers Discovery recently both reached streaming profitability, but they've struggled mightily to match Netflix's market share. Netflix's share of TV time is two and a half times larger than Disney Plus and Warner Brothers Discovery's max combined.

So they're just not in the same league in terms of market share. And that market share piece is fascinating, Paul, because I went back and looked. Nielsen's gauge measures where folks spend their TV time. That's where that data comes from. Netflix's share was stuck at 7.7% for 11 months straight, December 2023 to November 2024. And then in December of last year, it went from 7.7% to 8.5%.

So close to a full point of share gained in a single month. It took YouTube six months of last year, the last six months to gain that much share, which is why I thought the NFL games, which were in December, would have led to the spike as opposed to the fight, which was in November. Yeah. Yeah. It's hard to say exactly. I mean, you know, Netflix is somewhat selective about the metrics they share. And I thought it was kind of funny that

I don't know, a year, year and a half ago, they said they were going to stop focusing on subscriber growth. But then when they had this amazing spike, they're shouting it from the rooftops. But back to your point about market share, that Netflix's market cap now is bigger than Disney, Comcast, Paramount, and Warner Brothers Discovery combined, which is astounding. Yeah. Yeah.

It's just staggering how dominant a player they have become. What's difficult, I like your point about them choosing which numbers to share. They had said, look, at some point we're going to not be sharing these numbers because they don't mean as much. And really what that's saying is we can only grow so fast and Netflix needs another way to measure success and to convince investors that it's doing a good job. And

They said from q1 so from this quarter onwards they're not going to be reporting anymore So it can be hard to know the retention behavior of those folks who sign up in q4 for certain events. They are going to be reporting So not won't be reporting quarterly subscriber numbers from from this quarter, but they're going to be announcing paid memberships and

As they cross key milestones, and there's also a biannual engagement report, every Q2 and Q4 earnings that will detail what programming people are watching, but not the same kind of numbers that we've seen so far. Very convenient that they decided to note these numbers because 20% Q4 growth in subscribers, 20% higher than Q1 2020s pandemic base.

bump that Netflix got. And then in North America as well, they added close to 5 million people, which is nearly as many as they added, as Netflix added in the whole of 2023. So they just, I mean, they just crushed on the subscriber side of things. I was blown away by the numbers. Yeah. But

to what we were saying, there's going to be a ceiling, right? You can only add so many people. And so the other way of making money, if you can't add new people, is one way is advertising. And they're definitely trying to make strides in that on that side of things. The other Paul is raising prices and Netflix raising prices again. They announced a standard plan going up by 250 to reach 18 a month.

That's the first hike for that tier in three years. Premium plan going up by $2 to $25 and ad-supported tier going from $7 to $8. That's the first increase for that one since 2022 when it launched. R. Jeremy Goldman was noting Netflix's ability to implement successive price hikes without significant churn speaks to its strong content slate and enriched market leadership. However, as competitors, Disney+, Amazon Prime Video, others, raise prices, consumers' patience may be tested. So, Paul, will it? Will that patience be tested? Is there a new streaming price ceiling for consumers?

I feel like we ask this question again and again, year after year. Every year at least, yeah. And logically there is a ceiling. There's a ceiling to everything. But I also think that some of the survey data that I've seen over the years about whether subscribers will quit Netflix or other services if prices go up,

That doesn't tend to play out. I think there's a certain bravado when people are asked the survey question, but then when push comes to shove and they're going to hit that cancel button, I think a lot of people just kind of rethink it because there's so much value. I think also that because prices are going up, as a subscriber, I feel like I get an email at least every month or so from one of the services I subscribe to saying there's a price increase.

And as an analyst, I track this stuff on the services I don't subscribe to. So it just feels like a constant wave. So when I saw Netflix, I saw this news from this earnings report, and I thought, okay, they must have done this very recently. It turns out they really haven't. And to your point, in the ad tier, this is the first time they've raised the price. But from the consumer's point of view, they're looking at their wallet. They're not looking at when was the last time

didn't Netflix raise the price. So yeah, it does put a strain on people, but I think when it comes to Netflix in particular, it's going to be the last one standing. So if people start canceling their subscriptions, which I don't think they will, but even if they start to trim one or two, or usually with New Year's, you get the New Year's resolutions, and then you get people actually looking at their subscription budgets. And sometimes people will peel off one or two, but

I don't think Netflix is going to be one that many people cancel. And I think for that reason, they obviously can afford to raise prices, which they did. It's more like, I mean, they can afford to, it's more likely that they trade down, right? Like all these prices are going up, but if you compare the new standard plans price, which is going to be, or sorry, the new price of the standard plans can be 18 and the new price for the ad supporters can be eight. And so Liam Riley of CNN made this point in an article writing about

quote, price hikes are ratcheting up monthly costs and pushing subscribers toward those lower priced ad supported plans to increase profitability, right? Close quote, the ad supported folks are more lucrative folks. And so it almost feels like a price nudge. It almost feels like Netflix kind of wants you to go to the ad supported plan because it can make more money per user when folks are there. Yeah, it feels like a win-win. And actually,

Because a lot of people will stay on the ad-free plans, and then they're obviously going to be paying more. But yes, if it drives more people toward the ad-supported plan, that's also a plus for Netflix. And what is it, like 55% of new signups are on the ad plan? Yes. Yep. Exactly right. That's important. Exactly right. Yeah.

The other point here, Jason Aiton of Inknoting saying, I'm sure there will come a point when Netflix will cost $30 a month for the middle tier, and people will start wondering whether it's really worth it. When that happens, he says the company will have to figure out a different growth story. However, that's for another day. I'm sure that Netflix is hoping its ad business can shoulder some of that revenue load by then. So I think that's the long-term plan. Speaking about how much people are willing to pay, I saw some numbers from a trade desk

Six in 10, according to one of their surveys, six in 10 Americans, so most, say they're not willing to pay over $20 a month for streaming TV services. Netflix's plan, the mid-plan, the streamer,

standard one is 18 at the moment. But to your point, I've said this before, I think Netflix could raise it to 50 bucks and people would be like, ah, fine. You know, they may cancel this, that, the other. You know, they may trade down from certain brands to non-brands. I think people will find the money because this is, to what they're trying to do, this is their entertainment hub for a lot of folks. Yeah, I think they have more wiggle room than any of their competitors to do whatever they want with pricing. Yeah.

All right. To summarize, we talked about a lot today. Netflix had a very good 2024 revenue growth at twice the rate of 2023. North American revenue grew nearly three times as fast as the previous year. Its stock also up nearly 100% in the past 12 months. Four-year revenue outlook for this year, very optimistic. 13% growth is what they're expecting. That's versus the 16% they just posted last year.

Um, and with all of that, that revenue growth are expecting it is the $18 billion that they spend on content, um, that they've got coming up new seasons of squid game, uh, I guess season two, part two, whatever they're calling that. Um, Wednesday stranger things, um, 52 weeks of, of WWE programming, more NFL on Christmas, et cetera, et cetera. So they've got a lot to come. They look like they're in really great shape. Paul, thank you so much for talking to me about this company and what stream, what it means for, for streaming more broadly. I really appreciate your time.

Always good to chill with you, Marcus, with or without Netflix. Well played. Good ending. Thanks to the whole editing crew, Victoria, John Lance, and Danny Stewart, who runs the team, and Sophie does our social media. Thanks to everyone for listening in. We hope to see you. I don't really know when. When are we going to see you again? We'll see you Monday, hopefully, for Behind the Numbers, an e-marketer video podcast. ♪