Insights

Netflix Earnings: Subscribers Blowout and a Price Increase

30 January, 2025

Image: American Primeval, Netflix

Netflix reported strong financial results for the final quarter of 2024 this week exceeding estimates across different metrics.  The platform added nearly 19M subscribers, surpassing 301M global subscribers.  This was the last quarter Netflix plans to report on subscriber numbers so it definitely ended on a high note as it moves away from officially reporting this metric.  Revenue and earnings per share numbers also came in ahead of expectations. Markets cheered and the company’s stock price shot up by double digits.

Perhaps less exciting (at least from the perspective of consumers) was an announcement that Netflix also plans to raise prices.  The price increase is in line with Netflix’s goal to shift focus away from subscriber numbers towards revenue.  Higher prices should translate to increased revenue even if subscriber numbers take a hit.  

When we last did an analysis of the SVOD pricing landscape in the US Netflix was something of an outlier, offering an excellent bargain to subscribers for the amount of highly in-demand content on its platform relative to competitors.  The announced price increases (from $15.49 to $17.99/mo. for its ad-free Standard plan) bring Netflix more in line with where other platforms have priced their offering.  The 16% price increase still leaves room for Netflix to maintain its competitive edge and raise prices in the future.  We estimate that at the new price point Netflix is still priced about $1/mo. less than what would be expected given competitors’ pricing and catalog offerings.

price_vs_platform_demand_november_2024_chart.png

The risk in raising prices is that it will drive subscribers away but a few things should give Netflix confidence in this regard.  As noted above, even with the planned price increase Netflix’s value proposition is still exceptionally good.  Specifically, Netflix has high demand for the titles exclusively available on the platform which is a good way to guard against churn.  If titles are not available anywhere else subscribers have limited options if they are considering leaving.

The strong subscriber numbers reported this quarter give Netflix even more of a buffer to weather any churn impacts from a price increase.  Additionally, the decision to stop reporting quarterly subscriber numbers will obscure any negative impact to subscriber numbers from this move in future earnings reports.

Even if this move results in an increase in churned subscribers, Netflix is still a leader in keeping subscribers sticking around across regions.  According to Parrot Analytics’ Streaming Metrics, the platform has the lowest churn rate across regions compared to competitors.

netflix_regional_churn_rates_chart.png



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