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Netflix Earnings: Bigger Moat, Bigger Audience, Bigger Year Ahead?

In 2023, Netflix expanded its lead over the competition in global subscribers, consistent profitably, and the intangible ability to galvanize audiences in a way no other SVOD can.

The company is now well-positioned to further expand its moat as the undisputed streaming and entertainment leader in 2024 and beyond.

In Q4 2023, Netflix grew its demand share for original series with global and US audiences for the first time in over four years, since before Disney+ and Apple TV+ launched. Doing this without new episodes of Stranger Things, Wednesday, or The Witcher is a testament to Netflix’s strength. The platform was also the number one streamer for total catalog demand with US audiences in 2023, which accounts for all movies and series available on a platform.

Netflix, more than any other streamer, can have its cake (Is It Cake?) and eat it, too — audience demand for its original content lures in new subscribers, while demand for licensed content from its rivals helps keep them on the platform. This was exemplified by the ‘Suits effect’ and Netflix’s unrivaled capacity to launch new content at scale in the midst of a historic Hollywood labor stoppage last year.

That said, several potential future platform combinations — such as Hulu and Disney+ or even Max and Paramount+ — would jump far ahead of Netflix in the catalog demand category. This will be one of many storylines to watch as industry M&A speculation ramps up throughout the year.

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It won’t all be smooth sailing. New seasons of the aforementioned flagship originals remain mired in delays. Will Netflix be able to retain Stranger Things fans with just international series and network reruns?

From a financial standpoint, Netflix must provide a new growth strategy once the effects of its password crackdown wear off, and reveal how the ad tier is impacting ARPU. Revenue and profit are the name of the game and with Netflix’s gaming ambitions currently cost-free and no production shutdowns looming on the horizon to help with free cash flow, Wall Street will need additional growth narratives to keep the bears and bulls satiated.

But the supply and demand data is clear: in 2024 Netflix is positioned to expand its lead in the space, while the competition debates whether to forge ahead on their own, voluntarily opt out of the battle altogether, or join forces to take on the market leader.

State of the Industry

  • Between the beginning of 2020 and Q4 2023, there has been a 261% increase in the global supply of streaming original titles as leading companies have prioritized DTC platforms and chased Netflix’s business model.
  • However, the rate of growth for streaming original titles steadily slowed down in 2023, shrinking in all four quarters of the year. Before 2023, there had not been more than one quarter in a row of a shrinking growth rate in global streaming original supply.
  • In other words, streamers are still making new shows, just not at the same clip as they used to. This slowdown is a combination of both major companies shifting business models and cutting back, and the sharper drop offs in Q3 and Q4 are a clear result of the Hollywood labor strikes.

Netflix Streaming Original Supply Share

  • Netflix’s supply share of global streaming original titles has steadily ticked down since 2020, as new competitors entered the field, falling from 33.1% in Q1 2020 to 25.2% in Q4 2023.
  • Looking at the supply share of new premieres during each quarter, the impact of Netflix’s increased competition is even more stark. As recently as Q3 2021, Netflix accounted for 30.2% of all new streaming original titles released globally that quarter. Fast forward to Q3 2023 and Netflix’s share of new streaming originals worldwide was down to 14.7%.
  • However, Netflix reversed this trend big time in Q4 2023 — accounting for 27.4% of new streaming original premieres, nearly doubling its supply share compared to the previous quarter. This is clearly the result of Netflix having a deeper bench of new content in the can — something co-CEO Ted Sarandos emphasized repeatedly last year — and a more global footprint than most of its competitors.
  • Netflix’s ability to release new content in Q4 2023, such as Fall of the House of Usher, Blue Eye Samurai, and Squid Game: the Challenge, is a major reason why it was able to grow its US and global streaming original demand share, and subscriber base at a time when its competitors were struggling to attract new audiences to their respective SVODs.

Demand for Newly Released Series

  • Of all major US streamers, Netflix is the least reliant on demand for shows that released new episodes in the past 12 months. In fact, its percentage of demand for new content ticked down from 33.8% to 32.1% from Q3 to Q4 2023, likely as a result of the strike.
  • This shows Netflix’s volume of both licensed content, and hit originals that haven’t released new episodes lately, are still keep subscribers entertained and engaged.
  • As of Q4 2023, Netflix was able to both increase its supply of new series compared to the competition, and decrease its reliance on audience demand for shows released in the last 12 months. This combination of forces points to why Netflix is poised to pad its lead on the streaming and entertainment field in 2024.

Total Catalog Demand Share

  • While demand for original content drives subscription growth, library content is key for customer retention, and catalog demand is a good indicator of which SVODs consumers are most likely to use as a default ‘streaming home.’
  • Netflix remained in first place here, and slightly increased its position in the full year 2023, up to 17.9% from 17.7% in 2022.
  • While Netflix has a sizable lead over the field, it’s worth noting that a full combination of the some of the trailing platforms — such as Disney+ and Hulu, or Max and Paramount+ should Warner Bros. Discovery and Paramount merge — would overtake Netflix as the top streamer for all content demand.

Streaming Originals Demand Share

  • Q4 2023 was the first time since the ‘Streaming Wars’ began in earnest in which Netflix’s global demand share grew quarter over quarter, with an ever so slight increase from 33.3% to 33.4%.
  • This may seem small, but it is a telling datapoint. It means that, at least for one quarter, the growth of global demand for programming from legacy-backed and niche streamers is no longer outpacing the growth in demand for Netflix series, bucking a roughly four year trend. Whether or not Netflix can keep this up for more than one quarter remains to be seen.
  • Since Netflix’s global share of the supply of streaming originals is down to 25.2% in Q4 2023, 33.4% demand share should be considered an over-performance. Netflix is still delivering strong value to their subscribers especially when it comes to streaming originals — a key leading indicator of subscriber growth.
  • That said, three years ago, Netflix was outperforming its supply share by a much higher margin. In Q3 2020, Netflix had 32.0% supply share of global streaming originals, and 50.4% demand.

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