Netflix, the superior online movie streaming platform, has announced it recorded a profit of $9.83 billion globally in the third quarter of 2024, representing a yearly increase of 15%.
This increase in profit is attributed to a substantial increase in paid subscribers, which reached 282.7 million globally, up 5.1 million from the previous quarter as well as the streaming platform’s advertising business also gaining momentum, with ad membership increasing by 35 per cent compared to Q2, 2024.
This suggests that Netflix’s ad-supported tier is attracting a growing number of subscribers and generating additional revenue streams.
Why is Netflix Profiting?
The recent increase in Netflix profit figures can be attributed to certain key factors put in place by Netflix by the online streaming platform to stop leakages in profit and maximize profit overtime.
Such measures include: crackdown on password sharing, introduction of ad-supported tier and the subscription price hikes implemented in 2023.
Netflix password sharing Crackdown
The Netflix password-sharing crackdown went into effect in May 2023 in the US, UK, Australia as well as dozens of other countries worldwide. The key factor in the crackdown was the limitation of password sharing to members of the same household instead of the initial arrangement where an unlimited number of people scattered in diverse locations could use the same password to access the streaming device without individual subscriptions.
Under the law implemented in 2023, users were asked to set a “primary location”, which Netflix will likely determine based on their device’s IP address and once this primary location is set, people who don’t live there will have to either abandon Netflix, sign up and pay for their own private Netflix account or pay an additional fee and become an “extra member” to the existing account.
The fee for bring an ‘extra member’ is cheaper than paying for a standalone Standard or Premium subscription – but it also comes with a few restrictions which includes the fact it is only available if the primary account is subscribed to the Standard or Premium tier and also that a Standard subscription can only have one extra member, while a Premium account can only have two extra members.
Despite initial public outcry against the new rules, they seem to have worked as there has being a spike in Netflix subscriptions since the announcement of the policy as people decided to get their own account rather than abandon their favorite Netflix programs which has meant more subscribers and more profit for Netflix.
Introduction of ad-supported tier
In May 2024, Netflix announced its advertising tier has reached 40 million global monthly active users, a massive leap from the 23 million subscribers the initiative pulled in January.
Netflix first introduced its ad-supported subscription plan in November 2022 as part of a wider effort to drive revenue amidst slowing subscription figures witnessed by the streaming platform.
To drive this initiative, Netflix eliminated its cheapest ad-free plan, the basic and automatically move the subscribers affected to the ad-supported tier. This allowed Netflix to raise revenue without significantly increasing subscription fees as the ad-supported tier costs $6.99 monthly compared to the lowest ad-free subscription plan which costs $9.99.
Subscription Price Hike
In October, 2023, Netflix announced a hike in its subscription prices with its Basic and Premium plan moving to $11.99 and $22.99, respectively from the prior $9.99 and $19.99 price points. The streaming giants however left the $6.99 ad-supported plan and $15.49 Standard plan at the same price.
The result of this hike was an increase in Netflix’s profit margins in addition to an improvement in the average revenue per membership which had earlier decreased 1% year on year in Q3 2023.
Impact of Netflix Measures on Nigerians
As the initial spike in subscription figures as a result of the password-crackdown measure began to fade away, Netflix has witnessed its slowest subscriber growth in the last one and a half years in Nigeria.
Netflix has also raised its subscription prices in Nigeria, with the Premium Plan now costing N7,000 per month, a significant Increase of 40% from the previous price of N5,000. This marks the second price adjustment made by the platform in just three months, following a previous increase implemented in April 2024.
As detailed on the company’s website, the Standard Plan, which is popular among Nigerian subscribers for its HD quality and multi-screen viewing options, has also seen a price hike. The subscription fee for the Standard Plan has risen from N4,000 to N5,500, reflecting a 37.5% increase.
As a result, most Nigerians have had to migrate away from Netflix in search of cheaper alternatives to keep enjoying their favourite movies and shows leading to a reduction in subscription figures in Nigeria.
Future projections for Netflix
For full-year 2025, the company sees revenue hitting between $43 billion and $44 billion, compared to consensus estimates of $43.4 billion. This would represent growth of 11% to 13% from the company’s expected 2024 revenue guidance of $38.9 billion.
Subscribers also came in strong with another 5 million-plus subscribers added on the heels of breakout programming like “The Perfect Couple” and “Nobody Wants This.”
Subscriber additions of 5.07 million beat expectations of 4.5 million and follows the 8.05 million subscribers the streamer added in the second Q2, 2024. The company had earlier added 8.8 million paying users in Q3 2023.
“We expect paid net additions to be higher in Q4 than in Q3’24 due to normal seasonality and a strong content slate,” the company said, citing upcoming releases like “Squid Game” Season 2, the Jake Paul vs. Mike Tyson fight, and two NFL games on Christmas day.
