How Netflix Is Winning in 2024?
I’ve got to admit, I was blown away when I saw Netflix’s Q3 2024 earnings report. $9.8 billion in revenue with 282 million paid memberships — those are mind-blowing numbers! I had no idea Netflix was bringing in close to $10 billion in a single quarter. And if that wasn’t enough, they added 5 million new users this quarter alone. What really caught my attention, though, was their operating margin. It jumped from 22.4% last year to 29.6% this year. That’s a significant increase, showing that Netflix is not just keeping its costs steady but also grabbing a larger slice of profit.
This shift highlights something fascinating: Netflix is evolving. It’s no longer just an entertainment subscription service — it’s starting to behave more like a tech company. Think about it: companies like Google, Amazon, and Salesforce are all known for maintaining stable costs while increasing their profit margins. Netflix seems to be following in their footsteps, and as their operating margin grows, they’re becoming more and more profitable. A big part of this transformation is their new advertising business, which is seeing tremendous growth.
The Advertising Business is Taking Off
One of the key reasons Netflix is becoming more profitable is its rapidly expanding advertising business. Ads membership grew by 35% quarter-on-quarter, and Netflix is set to launch its ad tech platform in Canada next quarter, with a global rollout planned for 2025. This is a game-changer because it’s making Netflix more affordable for everyday people. Remember when Netflix cracked down on password sharing? At the time, it seemed like a move to force more people into buying their own subscriptions, but the real issue was that people didn’t see enough value in Netflix to justify the cost.
Now, Netflix is addressing that by introducing a lower-cost option through its ad-supported plans. This has allowed them to bring in even more users, and the best part is that it’s happening in a very systematic way. They started with North America, and now they’re expanding into Canada, Latin America, and other regions. The fact that they’re taking their time with this rollout shows how carefully they’re managing this transition — it’s not just a quick fix, it’s a well-thought-out strategy.
Why People Keep Coming Back to Netflix
What Netflix mentioned in their quarterly report really resonated with me. They said,
“When people love something, they’ll keep coming back.”
And it’s true. This is why Netflix’s retention rates are so strong — when users find value in a service, they stay. Not only that, but they tell others about it, which helps Netflix acquire new members. The beauty of Netflix is that people don’t come just to watch one particular show — they come for the overall experience of Netflix. It’s more than just a streaming service. It’s a feeling, a brand that people are emotionally attached to. Once they’re in, they discover new series, movies, and content that keeps them engaged.
The Growing Popularity of Ad-Supported Plans
Another thing worth mentioning is how their ad-supported plan is driving sign-ups. In Q3 alone, ad-supported accounts made up over 50% of the sign-ups in regions where ads are available. Membership in these ad-supported plans grew by 35% quarter-on-quarter, which shows that this lower-priced option is really resonating with consumers. It’s giving people more flexibility and affordability, which is crucial in today’s economic climate. And it’s just the beginning — Netflix is on track to hit critical scale in their ad-supported countries by 2025, which will set the stage for even more growth in the years to come.
Netflix’s Content is Its Biggest Asset
At the end of the day, Netflix’s success boils down to one thing: content. With an audience of over 600 million people, Netflix is catering to more tastes, cultures, and languages than any other entertainment company. Their ability to program for such a diverse audience is unmatched, and it’s why they keep investing in a wide variety of shows, movies, and even games. The goal is to create an ecosystem where users don’t just come to Netflix for one particular title — they come because they know there’s always something worth watching.
Netflix also measures the success of its content through watch time and engagement metrics. From massive blockbusters to niche titles, everything has a place on the platform. This year, Netflix dominated the Primetime Emmys with 107 nominations and 24 wins across multiple genres. Hits like The Crown, Beckham, and Love on the Spectrum proved once again that Netflix knows how to produce critically acclaimed content that also resonates with viewers.
Looking Ahead
Even with the challenges brought on by the end of password sharing, Netflix’s engagement remains strong. Members are still watching an average of two hours per day, and in owner households, viewing hours have actually increased year-over-year. Competitors in the streaming space are bundling their services to compete, but Netflix remains a one-stop shop for premium content.
References:
https://s22.q4cdn.com/959853165/files/doc_financials/2024/q3/FINAL-Q3-24-Shareholder-Letter.pdf
