Netflix Q2 Triumph
Record Subscribers and Emmy Nods, but Can They Fix the Advertising Gap?
Netflix continued to solidify its position as a leader in premium streaming with impressive Q2 2024 results. The platform added a record 8 million new subscribers, bringing its global total to 277.7 million. Netflix not only surpassed sales and profit expectations but also increased its revenue and margin forecasts for the year. To top it off, the streaming giant celebrated a remarkable 107 Emmy nominations, the highest of any network this year.
“This is what winning looks like” Pivotal Research Group analyst Jeff Wlodarczak remarked in a note on Friday. Similarly, MoffettNathanson’s Robert Fishman assured clients: “We do not see any rough seas ahead for Netflix”. Yet, despite this positive outlook, a significant challenge remains: Netflix’s nascent advertising business is struggling to keep up with its expanding user base. The company’s ad-supported plans, which are available in the U.S. and 11 other markets, have seen a notable increase in popularity. Subscribers to these ad-supported tiers rose 34% sequentially in Q2, now representing over 45% of all signups in Netflix’s advertising markets. However, total ad revenue has not kept pace with the growing viewership, which averages nearly two hours per day per member.
“We’re racing behind, essentially, to fulfill all of that increasing inventory and we’re lagging in that regard” co-CEO Greg Peters said during Netflix’s Q2 earnings interview on Thursday.
In early 2022, after a period of steadfast resistance to advertising, Netflix executives acknowledged the need for an ad-supported option following a rare drop in subscribers. Morgan Stanley forecasts that Netflix’s ad business will generate $7.1 billion by 2027, with $3.1 billion coming from ad sales and $4 billion from subscriber fees. This would represent 13.5% of Netflix’s total projected revenue. While the ad business remains a relatively small part of Netflix’s revenue, it is becoming increasingly significant.
“We believe that we’re on track to achieve critical ad subscriber scale for advertisers in our ad countries in 2025” Netflix stated in its Q2 shareholder letter. However, the company does not anticipate advertising to be a major driver of revenue growth in 2024 or 2025, noting that “building a business from scratch takes time.” In May, Netflix reported that its ad tier had 40 million global monthly active users, up from 23 million in January and 5 million a year ago, though this figure was not broken down by geography.
There’s every reason to believe Netflix can strengthen its ad operations successfully. However, as MoffettNathanson’s Fishman stated: “The onus is now on Netflix to build out its ad sales, measurement, and tech capabilities necessary to grow this business for the long term.”
SOURCE Variety
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Record Subscribers and Emmy Nods, but Can They Fix the Advertising Gap?
Netflix continued to solidify its position as a leader in premium streaming with impressive Q2 2024 results. The platform added a record 8 million new subscribers, bringing its global total to 277.7 million. Netflix not only surpassed sales and profit expectations but also increased its revenue and margin forecasts for the year. To top it off, the streaming giant celebrated a remarkable 107 Emmy nominations, the highest of any network this year.
“This is what winning looks like” Pivotal Research Group analyst Jeff Wlodarczak remarked in a note on Friday. Similarly, MoffettNathanson’s Robert Fishman assured clients: “We do not see any rough seas ahead for Netflix”. Yet, despite this positive outlook, a significant challenge remains: Netflix’s nascent advertising business is struggling to keep up with its expanding user base. The company’s ad-supported plans, which are available in the U.S. and 11 other markets, have seen a notable increase in popularity. Subscribers to these ad-supported tiers rose 34% sequentially in Q2, now representing over 45% of all signups in Netflix’s advertising markets. However, total ad revenue has not kept pace with the growing viewership, which averages nearly two hours per day per member.
“We’re racing behind, essentially, to fulfill all of that increasing inventory and we’re lagging in that regard” co-CEO Greg Peters said during Netflix’s Q2 earnings interview on Thursday.
In early 2022, after a period of steadfast resistance to advertising, Netflix executives acknowledged the need for an ad-supported option following a rare drop in subscribers. Morgan Stanley forecasts that Netflix’s ad business will generate $7.1 billion by 2027, with $3.1 billion coming from ad sales and $4 billion from subscriber fees. This would represent 13.5% of Netflix’s total projected revenue. While the ad business remains a relatively small part of Netflix’s revenue, it is becoming increasingly significant.
“We believe that we’re on track to achieve critical ad subscriber scale for advertisers in our ad countries in 2025” Netflix stated in its Q2 shareholder letter. However, the company does not anticipate advertising to be a major driver of revenue growth in 2024 or 2025, noting that “building a business from scratch takes time.” In May, Netflix reported that its ad tier had 40 million global monthly active users, up from 23 million in January and 5 million a year ago, though this figure was not broken down by geography.
There’s every reason to believe Netflix can strengthen its ad operations successfully. However, as MoffettNathanson’s Fishman stated: “The onus is now on Netflix to build out its ad sales, measurement, and tech capabilities necessary to grow this business for the long term.”
SOURCE Variety
Share:
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