Live programming drives growth at Netflix as attention shifts to adtech
Netflix grew total revenue by 16% to $10.2bn in Q4, aided by a net gain of 19m subscribers — the largest quarterly gain in the company’s history.
Operating income grew 52% year on year to $2.3bn, while operating margin also improved to 22% from 17% a year earlier.
It is the last quarter Netflix has committed to regularly report subscriber numbers.
“In 2024, we executed on our plan to reaccelerate growth”, a statement to shareholders read. “Our Q4 slate outperformed even our high expectations.”
Live programming attracted large audiences during the quarter, led by coverage of the Jake Paul vs Mike Tyson fight, which was the most-streamed sporting event of all time — it reached a total audience of 108m, with a live peak of 65m concurrent viewers. Netflix also delivered two NFL games on Christmas Day that averaged over 30m global viewers.
Such live programming occurred in tandem with the release of successful scripted programming such as the second series of Squid Game, action thriller Carry-On and UK original Black Doves.
In the UK, Deadline reported that Netflix was the most-watched TV service in the UK during September, October and November, overtaking BBC One. According to Barb data, Netflix’s average audience reached 43.2m during the period, compared with BBC One’s 42.3m viewers. However, BBC One pulled ahead again in December, helped by Christmas showings of Gavin & Stacey and Wallace & Gromit: Vengeance Most Fowl.
On the company’s earnings call on Tuesday, co-CEO Ted Sarandos said the most encouraging sign was that “the retention behaviour of those folks who did come in for those events look a lot like the folks who come in for all of our other big titles”.
‘From crawl to walk’
According to Netflix’s letter to shareholders, a “top priority” in 2025 is to “improve our offering for advertisers so that we can substantially grow our advertising revenue”.
Co-CEO Greg Peters explained that, in Q4, the ad tier represented over 55% of sign-ups across the countries in which it was available.
“We’ve seen membership on those ads plans increase about 30% quarter over quarter,” he continued. “That was on top of 35% [in the previous quarter].”
But Peters is “even more excited” that engagement from ad tier members “remains healthy” in terms of view hours per member.
“We’ve done the work, I would say, to meet our scale goals for advertisers in ’25. And that means that increasingly we’ve been able to shift more of our focus, more of our attention, on making the offering better for advertisers to increase monetisation of that growing inventory,” Peters added.
Although Netflix did not reveal specific ad revenue figures, Peters said the streamer exceeded its target in Q4, doubled its ad revenue year over year and expects to double that revenue again in 2025.
A significant development for luring more advertisers to the platform will be Netflix’s first-party adtech platform, which launched in Canada last year. It is slated to launch in the US in April and another 11 markets later in 2025.
According to Peters, the adtech stack will allow Netflix to deliver more programmatic availability and enhanced targeting features to clients.
“We’re leveraging more data sources, more measurement, more reporting, more incrementality studies,” he said. “I think you can say that 2025 is the year that we transition from crawl to walk.”
Netflix’s ‘secret ingredient’
According to Nielsen’s latest The Gauge report, Netflix had its best share of total TV viewing in December in the US since July 2023, accounting for 8.5% of total TV viewing. It is currently the most-viewed streamer apart from YouTube in that market.
Mike Proulx, vice-president, research director, at Forrester, suggested that “Netflix’s attention to quality content is the reason for an overall strong year and fourth quarter”.
“To state the obvious, it’s content that drives users to streaming services,” he said. “The company’s secret ingredient is its increasingly steady stream of carefully curated live programming.”
Such programming is also expanding audiences for US-based sports, such as the NFL and WWE, globally.
“We are constantly trying to broaden our programming,” Sarandos said on the earnings call. “Live events is one of those things and sports is part of those live events.”
He added that WWE is “off to a great start” with 5m views across its first week streaming on the platform. Netflix is also seeing 25% growth in non-live viewing of the sport, driven by audiences in time zones outside the US. The UK, Canada, Mexico, Australia and Brazil were cited by Sarandos as “particularly big markets” for new viewing for WWE.
Still, the “underlying economics of full-season big-league sports” are “extremely challenging”, according to Sarandos, who implied that while live sports is “a really fantastic thing” for Netflix, it remains only a “part” of the streamer’s strategy for expanding into live events.
Netflix CEO: ‘Work still ahead of us’ to improve ad offering
‘FOMO’ leading to price flexibility
Proulx argued that Netflix’s focus on “tent-pole events” during Q4 helped not only amass audiences, but also attract advertisers to buy against must-see cultural moments.
He suggested that Netflix’s aggressive move into live programming can create differentiation from its rivals, although the likes of Amazon Prime Video and Apple TV+ have also invested heavily in live sports in recent years.
“FOMO is a powerful tool in piquing interest and creating stickiness, which suits Netflix well,” Proulx added.
Such sentiment is likely to be used to drive continued subscriber growth despite further price hikes being announced for all of Netflix’s various tiers in the US, Canada, Portugal and Argentina — including a hike for the ad-supported tier for the first time.
The ad tier will see its price jump from $6.99 to $7.99 per month in the US. Meanwhile, the standard ad-free tier will jump from $15.49 to $17.99 per month, while the premium tier will increase from $22.99 to $24.99.
“When you’re going to ask for a price increase, you better make sure you have the goods and the engagement to back it up,” Sarandos said on the earnings call. “And I feel like what we have going into 2025 is just that.”
Referring to the ad plan as “incredible entertainment value”, Sarandos and Peters cited a “never-been-better” TV and film slate in 2025. It includes new series of Wednesday, Stranger Things, The Night Agent and You, as well as films including a new Knives Out mystery and Guillermo del Toro’s Frankenstein.