Meanwhile, the company’s revenue just beat Wall Street expectations and paid membership is at its highest ever.
Netflix has had a good start to the year as its latest earnings show the streaming giant added more than 13m paid subscribers in the fourth quarter of its financial year.
Beating Wall Street – and its own – expectations on multiple fronts, Netflix also reported a revenue rise of 12.5pc over the same quarter in 2022 at $8.83bn. Perhaps most remarkably, net income for Q4 stands at $938m – up from a relatively meagre $55m in 2022.
In a letter to shareholders yesterday (23 January), the company said that it was able to increase value to members by further improving its core offerings of series and films while also broadening other segments such as games, sports and live entertainment.
“We enter 2024 with good momentum. We expect healthy double digit revenue growth for the full year,” the company wrote, forecasting a 13pc growth rate for the first quarter of this year.
“We’ll also continue to invest in and build our ads business; we expect strong growth in 2024 but off a small base so it’s not yet a primary driver of our overall revenue growth. Our aim is to make ads a more substantial revenue stream that contributes to sustained, healthy revenue growth in 2025 and beyond.”
Netflix also said that it is sunsetting its cheapest ad-free Basic subscription plan in some countries where ad-supported plans are available, starting with Canada and the UK in the second quarter of this year.
The company claimed late last year that its ad-supported subscription tier managed to reach 15m monthly active users one year after it was launched. The streaming giant was against the idea of adverts on its service for years, but had a change of heart after it reported a loss of around 200,000 subscribers in the first quarter of 2022.
According to Mike Proulx of Forrester, as one of the only profitable major streaming services Netflix’s degree of success with its ads business in 2024 will be the “key determinant” in driving margins up to the company’s goal.
“This is dependent on continued scaling of its ad-tier as well as innovative ad-types and sponsorships that break through. Since just about every streaming service has jumped on the ad-tier bandwagon, advertisers have a lot more choices in the CTV space,” he said.
Films and TV shows aside, Netflix said its other segments – particularly gaming – have been attracting a lot of attention. Game engagement tripled last year, according to the company, following the release of the Grand Theft Auto series on the platform.
“This has become our most successful launch to date in terms of installs and engagement, with some consumers clearly signing up simply to play these games,” Netflix wrote.
10 things you need to know direct to your inbox every weekday. Sign up for the Daily Brief, Silicon Republic’s digest of essential sci-tech news.
