Netflix: How much did the company earn and how is the number of viewers growing?

In the third quarter of 2024, Netflix achieved revenue of $9.82 billion, while simultaneously increasing its subscriber base by 5.07 million people. This result represents a significant step in the months-long transformation of the giant's business model, which is shifting focus from mass user acquisition to maximizing revenue per account. Investors have accepted this data as confirmation that the financial strategy adopted by the board is not merely a temporary experiment, but a permanent operational foundation for the company.

The year-on-year revenue growth rate is approximately 15 percent, which is a significant acceleration compared to the same period in 2023, when the company recorded $8.54 billion in turnover. A comparison of these two quarters shows the evolution of an enterprise that has learned to monetize even those market segments previously considered saturated. While in the third quarter of 2023 Netflix gained 8.76 million new subscribers, the current result of 5.07 million indicates a slowdown in the pace of new base growth, while simultaneously increasing the financial efficiency of each acquired viewer. The slowdown in the pace of acquiring new customers was expected by the market and did not negatively affect the stock valuation.

Scale of growth and market dynamics

An analysis of the subscriber portfolio in the third quarter of 2024 shows that Netflix has ceased to be a platform that grows solely through new registrations. The company has focused on three pillars: converting password-sharing users, expanding the ad-supported plan, and global price optimization. The introduction of paid extra profiles in many regions of the world forced users to either pay for an account themselves or pay extra for an existing plan, which directly affected the Average Revenue per Member (ARM).

It is worth looking at specific data regarding price hikes. In October 2024, just after the quarter closed, the company decided to raise prices in additional countries, including Spain and Italy. In Italy, the price of the Premium plan rose from 17.99 to 19.99 euros, an increase of over 11 percent. Similar moves were recorded earlier in Japan and in American markets, where the prices of ad-free plans rose by an average of $1–2 over the year, depending on the tier. These decisions did not trigger a mass exodus of customers, which confirms the high loyalty of the base. Viewers treat Netflix as a "utility" service, similar to electricity or high-speed internet, where cancellation is cumbersome and involves losing access to a content library that no other provider offers.

The high subscriber growth in the third quarter was stimulated by specific premieres that attracted millions of viewers to their screens. The biggest hit turned out to be the series "Monsters: The Lyle and Erik Menendez Story," which dominated global viewership rankings within the first weeks of its release. The fourth season of "Emily in Paris" also played an equally important role, maintaining the loyalty of a key demographic for the platform. These successes show that the company has a unique ability to create "cultural events" within its own service, which translates into maintaining a low churn rate.

Margin strategy and cost optimization

The increase in operating margin to 29.6 percent in the third quarter of 2024 is the result of consistently cutting unnecessary spending on productions that did not achieve projected viewership results. Netflix has drastically changed its policy for ordering new content. Instead of flooding the market with dozens of average-quality productions, the company is investing in projects with high viral potential and in expanding its own franchises.

Operating costs have been optimized through better use of data. The company's algorithms are no longer used just for content recommendations for users, but primarily for precise estimation of production budgets. If data indicates that a particular film genre is no longer generating profits in a specific region, the company immediately phases out investments in that direction. This "data-driven" approach distinguishes Netflix from classic film studios, which often base decisions on the intuition of producers.

The impact of price hikes on the margin is direct. Every euro or dollar added to a monthly subscription goes almost entirely to operating profit, because the technical maintenance costs of an existing account are marginal. In the third quarter, the company showed that it can manage this process without losing stability. The board openly communicates that price hikes are a tool to fund increasingly expensive original productions, which is intended to justify higher prices in the eyes of subscribers.

Analysis of results in a market context

The streaming sector is currently in a phase of maturity. The days when every platform grew exponentially are gone forever. Netflix was the first player in the market to move from a "growth at all costs" phase to a "cash generation" phase. Competitors such as Disney+ or Warner Bros. Discovery are still struggling with the profitability of their streaming divisions, while Netflix has been operating on positive cash flow for years.

The report for the third quarter of 2024 shows that Netflix is successfully winning the war of attrition. While other players were forced to license their content to third parties to patch budget holes, Netflix consistently sticks to its "only on our platform" strategy. Thanks to this, the company holds the strongest bargaining chip in its relationships with users. If you want to watch the most popular series of the year, you must have a subscription to this service, not another.

It is worth noting the company's plans for 2025. The board announced that starting next year, it will stop providing quarterly data on the number of subscribers. This is a signal that the company wants to change the market narrative. Instead of tracking "headcount," investors are expected to focus on revenue and margins. This is a bold move intended to cut off speculation that the market has reached saturation. If Netflix stops reporting subscribers, it will mean that the company has deemed this metric secondary to actual cash flow.

Prospects for shareholders

For shareholders, the company's current financial situation is the most stable in its history. The company has vast cash reserves, which it uses to buy back its own shares, increasing the value of the holdings of remaining investors. This is a classic capital reward mechanism used by the world's largest technology corporations.

However, the company faces challenges that are rarely mentioned in official communications. The first is the saturation of developed markets. In North America and Western Europe, the number of potential new subscribers is limited. The company must therefore seek growth in regions such as Southeast Asia or Latin America, where purchasing power is lower and competition from local providers is very strong. To win there, Netflix will have to offer cheaper packages, which may affect the average revenue per user.

The second challenge is the quality of the offering. Viewers are increasingly aware of what they are paying for. If Netflix starts lowering the quality of its productions to save on costs, a "streaming fatigue" phenomenon may occur. In the third quarter of 2024, this was not visible, but the pressure to maintain a high level of scripts and production is enormous. The company is building its own library, which is safe long-term, but requires huge capital outlays. If one or two large projects turn out to be failures, it will affect the results of the entire quarter.

However, the results to date show that Netflix knows how to manage risk. The board is not afraid of drastic changes, such as the introduction of ads, which seemed impossible just two years ago. This flexibility is the company's greatest asset. The market values this very highly, which is visible in stock market quotes, which have reached historical highs in recent months.

Significance of changes for the user

From the point of view of the average user, Netflix is becoming an increasingly expensive and restrictive service. The fight against account sharing ended the era of "free" access that was the foundation of the platform's popularity for years. Now, the user must decide: either pay more for higher quality, or accept ads in exchange for a lower price.

The catch in this entire strategy is the fact that Netflix is increasingly controlling what we watch through its algorithms. The platform is no longer just a library of movies, but a content curator whose task is to keep us on the service for as long as possible. This change is beneficial for financial results, but for many viewers, it means a departure from the idea of an open platform in favor of a hermetic ecosystem.

It is worth following how the company will develop its video game segment. In the third quarter of 2024, Netflix did not provide data that would indicate a breakthrough in this area, but investments in mobile games are ongoing. This is an attempt to build another source of revenue that could diversify the company's offering in the future. If Netflix manages to combine video streaming with games within a single subscription, the barrier to entry for the competition will become even higher.

Questions and answers

By how much did the number of Netflix subscribers grow in the third quarter of 2024?

In the third quarter of 2024, Netflix gained 5.07 million new subscribers, which confirms the maintenance of growth momentum despite market saturation in many regions of the world.

What revenue did Netflix generate in the period under review?

Netflix's revenue in the third quarter of 2024 amounted to $9.82 billion, which is an increase of approximately 15 percent compared to the same period in 2023.

Why did Netflix increase its operating margins?

The increase in margins results from a combination of global service price hikes, effective optimization of original content production costs, and the expansion of the subscriber base, which allowed for better monetization of the existing technical infrastructure and film library.

What specific events influenced subscriber growth in the third quarter?

The main drivers of growth were the premieres of hit productions such as "Monsters: The Lyle and Erik Menendez Story" and the fourth season of the series "Emily in Paris," which effectively attracted new viewers and maintained the interest of existing users.

What changes in pricing policy have been introduced recently?

Netflix carried out a series of price hikes in key regions, including Italy and Spain, where fees for the Premium plan rose by about 11 percent, which fits into the global trend of adjusting price lists to increase the average revenue per user.

Does the company plan to continue reporting the number of subscribers?

The Netflix board announced that starting in 2025, it will stop providing quarterly data on the number of subscribers, shifting the focus of communication with investors to financial results, such as revenue and operating margins.

What challenges does Netflix face in the coming quarters?

The main challenges remain the saturation of developed markets, the pressure to maintain high content quality amid rising production costs, and the need for effective expansion into emerging markets, where the purchasing power of consumers is significantly lower.

Does competition affect Netflix's results?

Despite fierce competition in the VOD sector, Netflix maintains its leadership position thanks to its "only on our platform" strategy and financial efficiency, which allows it to invest more in original productions than most rivals in the entertainment industry.

Sources

Article prepared by the Wiadomości PRO editorial team with the support of artificial intelligence. Facts come from the sources listed above.