Netflix's Sports Push Fuels Holiday Quarter Subscriber Boom
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Netflix is expected to report a significant surge in subscribers for the fourth quarter of 2024, driven by its strategic investment in live sports content, as reported by Reuters. The streaming giant's bet on major sporting events like the "Jake Paul vs. Mike Tyson" boxing match and NFL games seems to have paid off, attracting new subscribers and boosting advertising revenue.
Netflix, set to release its earnings report on Tuesday, has been strategically expanding its sports content offerings to appeal to younger audiences and generate additional advertising revenue. The company's recent crackdown on password sharing has also contributed to subscriber growth.
The success of Netflix's sports programming is evident in the viewership figures. The Tyson-Paul fight garnered over 60 million viewers globally, while its NFL broadcasts on Christmas Day averaged 26.5 million viewers in the United States.
"Live sports provide some stability for the advertising side and then from the subscription side, it just makes the account stickier for people who are already using Netflix," noted eMarketer analyst Ross Benes, to Reuters. The premium advertisers typically pay for ad placements during live events, particularly those with large and loyal audiences like NFL games, aligns with Netflix's objective to expand its ad-supported tier.
Beyond sports, Netflix's subscriber growth in the last quarter was further fueled by the return of the popular South Korean series "Squid Game," whose second season garnered a record-breaking 68 million views in its premiere week.
Analysts estimate that Netflix potentially added 9.2 million subscribers in the fourth quarter, representing a significant increase from the 5.1 million additions in the third quarter. However, this figure falls short of the 13.1 million increase recorded a year prior.
This quarter will mark the last time Netflix reports subscriber additions, as the company shifts its focus to alternative performance metrics like revenue and profit. This shift, attributed to slowing subscriber growth, will intensify scrutiny of Netflix's advertising tier, widely considered its next major growth driver.
"Netflix needs to give some confidence to the brands and marketers about how well it's doing in advertising," observed PP Foresight analyst Paolo Pescatore, to Reuters. Analysts also anticipate that Netflix will increase the price of its standard tier in the first half of 2025, potentially incentivizing more subscribers to opt for the ad-supported tier, which is more lucrative for the company.
Netflix's advertising revenue is projected to reach $528.9 million in the fourth quarter, while total revenue is expected to rise by 14.5% to $10.11 billion.
Despite the impressive performance in 2024, Netflix shares closed last year with a gain of 83%, significantly outperforming legacy media competitors struggling with the decline of cable TV and seeking to improve streaming profitability.