I was recently locked out of my Netflix account. Well actually it was my Dad’s Netflix account. Their pesky little shared account search party finally caught up to me and pulled the cord. Is it annoying? Yes. Will I pay for my own Netflix? I’m not sure yet. I don’t think there’s anything on Netflix, besides maybe the Crown and Peaky Blinders (sue me), that is actually worth paying for in full for myself. Even if I do pay, I need to decide between ads or no ads now because TV ads are back I guess. The other day I was watching a scary movie on Hulu that would cut to ads at the worst moments. Back in the day, when we would watch normal TV with ads, at least the ads worked their way into the movie or show. Now you’re just bombarded with ads (at a very high volume) off-rip. What exactly did we solve with streaming?
Earnings
Maybe I’m the only one complaining because Netflix is doing great. On Tuesday, they announced stellar earnings:
Netflix reported fourth-quarter net income of $937.8 million, or $2.11 per share, versus $55.3 million, or 12 cents per share, in the prior-year period.
The company posted revenue of $8.83 billion for the quarter, up from $7.85 billion in the year-ago quarter.
As Netflix focuses on improving profits, the company increased its 2024 full-year operating margin forecast to 24%, up from a range of 22% to 23%. It cited the weakening of the U.S. dollar and a stronger-than-forecast fourth-quarter performance. - Netflix shares pop 10% as streamer adds 13.1 million subscribers, tops revenue estimates, CNBC
That’s a lot of money. The company also added 13.1 million subscribers, its largest-ever fourth-quarter subscriber growth, bringing its total number of subscribers to 260 million. Netflix started the streaming wars and remains king:
When you spend so much time at the top, you begin to get lazy. First, they innovated, now they’re reverting so far back that they’re even adding sports:
Netflix made the surprise announcement that it struck a 10-year deal to air the WWE’s Monday Night Raw. The $5 billion deal will bring the live weekly show to streaming after over three decades of airing on linear television. Under the terms of the deal, Netflix will get Monday Night Raw for 10 years, with a chance to end the contract after five. NBCUniversal’s Peacock currently has a library of WWE content on its service, but it doesn’t air Monday Night Raw live. Peacock also still has the rights to the WWE’s premium events, like the Royal Rumble and Wrestlemania. - The Verge
While most of the streamers have added ad-supported tiers, one way to get consumers to watch ads, even at the highest paid level, is through live events. Amazon figured this out very early on when they secured Thursday Night Football. I’m surprised Netflix was willing to pay for these rights, by the way they operate, I would’ve predicted they attempt creating some sort of league of their own considering their first major sporting:
In November, the company aired its first live sports broadcast — a golf competition between PGA pros and F1 racers — and later announced its plans to host a live tennis match this March featuring veteran player Rafael Nadal and Carlos Alcaraz. Netflix’s WWE deal marks its biggest foray into sports yet. — The Verge
Corporate Behavior
One thing that stood out to me was this quote from their CFO:
Chief Financial Officer Spencer Neumann said Netflix plans to increase spending on content, coming out of last year's dual Hollywood strikes. He anticipates the streamer would invest as much as $17 billion this year, but added, "we want to do it in a smart, judicious, responsible way.” - Netflix hits fourth-quarter subscriber record, fueled by 'The Crown' and 'The Killer', Reuters
Something changed after the writer’s strike. While they ended up signing a deal and calling it a win, the aftermath looks much more bleak. It’s reported that the strike resulted in the loss of 45,000 jobs and an estimated $6.5 billion loss to the economy of Southern California. While the traditional studios were the ones left reeling, tech giants like Netflix, Amazon, and Apple didn’t really care. While the former two have other businesses that are much more important and profitable to worry about, Netflix changed the conversation.
I’m willing to bet that the “smart, judicious, responsible way” is just beefing up international production. According to Omdia, 42% of Netflix's original content production value in 2022 came from outside the US. In Q2 2022, Netflix commissioned 160 TV shows and movies, with most of them being produced outside the US. While this creates great opportunities abroad, it seems Netflix has deemed American writers a bit too expensive. Factoring in the expansion into live television and reality TV, this cuts out writers even more.
With streaming becoming just a bundle with ads and sports, what did we actually achieve here? Basic cable that I can watch on my phone.
Thank you
There’s a broader conversation happening here when it comes to how the streaming giant is spending their money. I’ve read about the ‘Death of Hollywood’ for a while now, and it looks to be coming true. It’s not just movies, but the overall media landscape. There are layoffs across the board with thousands of writers out of a job that didn’t pay well to begin with. This brings me back to the ongoing trend of independent media becoming the new norm. What I’m wondering now is if the ‘legacy’ content keeps getting more expensive, will consumers start rethinking and moving their dollars toward YouTube, Patreon, and other independent creators? As always, if you have any questions, want more explanations, or strongly disagree, comment below, follow me on Twitter (X), follow me on Threads, follow me on TikTok, or shoot me an email.
Disclaimer: These views are my own, and do not necessarily reflect the views of any organization with which I am affiliated with.