Industry Insights: Netflix delivered excellent results to end 2023 and now has 260.8 million subscribers, the US commissions at the heart of the Peak TV metric fell 24% last year, and there is streaming success at the Emmys and perhaps the Oscars.
Netflix ends 2023 on a high
Netflix has released its latest quarterly financial report and has beaten expectations with an addition of 13.1 million subscribers in the three months to the end of December. That is its best Q4 period ever and the most additions since the pandemic-fueled explosion of numbers in 2020
All the headline figures are positive. It now has a total of 260.8m subscribers, it made $5.4bn profit on revenue of $33.7bn in 2023, and it expects to spend a massive $17bn on content this year.
In its Q4 2023 letter to shareholders, it puts its current profitability down to three things.
First is pricing. "We largely put price increases on hold as we rolled out paid sharing. Now that we're through that, we're able to resume our standard approach," co-chief executive Greg Peters said on a call with analysts. That probably translates as meaning consumers are going to have to get used to yearly price increases.
Second, ads. “Scaling our ads business represents an opportunity to tap into significant new revenue and profit pools over the medium to longer term,” writes the company. In Q4 23, ads membership increased by nearly 70% quarter over quarter, driven in part by the phasing out of the Basic plan for new and rejoining members in its ads markets. “On the advertiser side, we continue to improve the targeting and measurement we offer our customers,” it adds.
Third is monetizing sharing, which is how it chooses to refer to its password crackdown program. “We believe we've successfully addressed account sharing, ensuring that when people enjoy Netflix, they pay for the service too. Features like Transfer Profile and Extra Member were much requested, and many millions of our members are now taking advantage of them.”
The company says that paid sharing is now its “normal course of business,” and it is using it to grow its base. It reckons there is further room for growth, too, and it is actively targeting the near-term addressable market of 500 million connected TV households (excluding China and Russia), which it also expects to increase over time as broadband penetration rises.
Finally, it also announced a significant new deal with WWE wrestling, which perhaps indicates how it plans to expand into those 500 million households. Starting in January 2025, WWE’s Raw will be live on Netflix exclusively in the US, Canada, UK, and Latin America, with other countries and regions to be added over time. Netflix will also become the home of WWE shows and specials outside the US.
The company also excitedly talks of branching out into other media interests, including gaming and even the theatre.
“With over 260 million households and growing, no entertainment company has ever tried to program at this scale and for so many tastes and cultures,” it says. How it balances all those competing audiences and where precisely it decides to spend that $17bn content budget will be its story for 2024.
Peak TV may have passed, but content spend is rising
Peak TV is the concept that more and more TV content is being made all the time and historically has been tied to the number of scripted shows aired in the US in any given year. For years, the figures have steadily increased, but there are signs we may have now come to an end of its era. This follows a historic fall in the amount of scripted US TV releases in 2023. From a high of 633 in 2021 and 2022, the 2023 figure fell a massive 24% to 481 shows. And while it’s tempting to blame the SAG-AFTRA and WGA strikes for this, according to Ampere Analysis, who crunched the numbers, that’s not the whole story.
SVOD services released 77 fewer seasons, and Broadcast TV released 55 fewer seasons, the latter part of a long-term trend that was no doubt exacerbated by the strikes delaying seasons to Q1 2024. The SVOD decline, however, was first noticed at the start of 2023 pre-strike action and seems to be a consequence of the streamers’ quest for profitability. Netflix reduced its releases to just 68 in 2023, down from 107 the year before. Elsewhere, there were drops for Peacock (-20 titles), Hulu (-11), Max (-9), and Paramount+ (-4).
Orders are down too, meaning that the decline in releases will likely deepen further in 2024.
Interestingly, the decline was also more evident in US-based commissions. Across the top eight streamers, these were down to 202 from 342 (-40%), while international commissions held much steadier, down to 295 from 429 (-31%). This is probably partly down to the strikes, but it also helps emphasize that streaming video is an international enterprise nowadays.
Global content spending meanwhile, will reach $247 billion in 2024, up from last year’s $243 billion. Given a predicted global inflation rate of 5.79% this is effectively a reduction in budgets. However, streaming services are forecast to buck this trend, raising total content investment by 7% in 2024 to $46 billion. Impressively, it looks like Netflix will be accounting for 37% of that all on its own.
Streaming success at the Emmys and the Oscars
[The Hollywood Reporter, Variety]
It was another successful night for the streamers at the much-delayed 2023 Emmy Awards, which finally took place on January 15.
HBO/Max was the big winner, with 31 awards when measured across both the Primetime ceremony and the Creative ceremony that takes place a few days earlier and covers some of the essential craft skills that go to make up a successful program but aren’t deemed glamorous enough for live TV.
Behind them, Netflix took 22, the Disney-backed FX took 16, Apple 10, Disney+ 9, and Amazon 6. The first traditional broadcaster to appear in the list was NBC with 5, which it will have enjoyed hugely as Fox was the host broadcaster this year in the US and only received 4.
However, HBO/Max’s victory is a slight case of creative accounting, as Warner Bros. Discovery is allowed to enter all its programming as ‘HBO Max’ titles. As The Hollywood Reporter (who analyzed the winners this year rather than the TV Academy itself) points out, Disney topped WBD with 36 combined wins when tallying up the total from across the company’s portfolio, including ABC, Hulu, Disney+ and National Geographic.
Big winners as far as the individual programs were concerned were The Bear (FX) with ten awards, while Beef (Netflix) and The Last of Us (HBO) took home 8, Succession (HBO) 6, and Welcome to Wrexham (Hulu) 5.
Over in the movie world, it was Netflix and Apple that took the plaudits, at least as far as Oscar nominations go. Netflix beat Apple in the studio race for most Oscar nominations, scoring 18 versus Apple’s 13. Again, Disney is the winner here if you add all its separate studio nominations together. This produces a long list covering 20th Century Studios, Disney+, Hulu, Lucasfilm Ltd., Marvel Studios, National Geographic Documentary Films, Pixar Animation Studios, and Searchlight and produces 20 nominations.
Netflix was the most nominated studio for three years in a row from 2020-22, so it will be happy to take back that crown at least. Whether it can convert that into actual awards — and one of its nominations is for Best Picture for Maestro — we will find out on March 10.
