In the fourth quarter of 2024, Netflix (NASDAQ: NFLX) announced a significant increase in its profitability and subscriber numbers, highlighting its continued dominance in the streaming services market. The number of new paid memberships increased by 19 million, bringing the total to 302 million subscribers. This record increase points to the giant's strong market position and growing demand for content.
Strategic price increases
The current increase in subscription prices in the US, Canada, Argentina and Portugal is a strategic move that is likely to increase the average revenue per user, while also helping to cover the cost of high-quality original content. Despite the higher prices, customer loyalty is expected to remain high, thanks to popular titles such as Squid Game 2 and the movie Carry-On. The standard ad-free plan now costs $17.99 per month, up from the previous price of $15.49, while the ad-supported plan has increased from $6.99 to $7.99 per month.
Financial indicators
Netflix has announced that it will no longer report paid membership numbers and average revenue per member starting in the first quarter of 2025, suggesting a shift in performance rating metrics and possibly a strategic shift in focus to innovation and service expansion. The move may provide investors with less transparency, but it also promises to focus on key financial metrics such as total sales and profitability.
Revenue growth of 16% year-over-year was driven primarily by content successes such as the aforementioned second season of Squid Game and the movie Carry-On, which also made it into the company's top 10 most popular films. Thus, these titles have contributed significantly to increasing the attractiveness of the platform and its ability to retain subscribers despite higher prices.
Expansion into new areas
Netflix is also hinting at expanding into new areas such as live programming and the gaming sector. This expansion could attract new demographics and open up new opportunities for growth. The increased presence in the advertising segment, as well as the success of major sporting events such as Jake Paul's fight against Mike Tyson, which became the most-watched sporting event in Netflix history, show the high potential of this strategy.
Optimistic outlook and impact on investors
The outlook for 2025 is optimistic, with revenue expected to be between $43.5 billion and $44.5 billion, which is $500 million more than previous projections. With the return of popular series like Stranger Things and Wednesday, Netflix looks set to maintain its position at the forefront of popularity and innovation in streaming. For investors, this development represents a significant opportunity. The company seems to be on the right trajectory in order to maintain growth, despite increased competition in the market. Investors should therefore closely monitor the implementation of pricing strategies and expansion into new services for the next period, as these factors can affect the long-term sustainability and overall profitability of the company. [1]
[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which is subject to change. Such statements are not a guarantee of future performance. They involve risks and other uncertainties that are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.
Resources:
https://s22.q4cdn.com/959853165/files/doc_financials/2024/q4/FINAL-Q4-24-Shareholder-Letter.pdf
https://finance.yahoo.com/news/netflix-raising-prices-adding-19-220000887.html
