Happy Monday War & Peaceniks. Let’s take stock.
It’s earnings season again - time to get under the hoods of our favorite Media companies and see what they’ve got in their engines. 🏁
As they do every quarter, Netflix kicked off earnings season. As they do most quarters, they did so with a flurry of news and obfuscation. To the good: Revenue was up 17%, Net Income up 44%, and subs grew 17% to 277 million. Netflix is by far the biggest paid TV channel on earth. They’ve officially won the Streaming Wars!
Woot.
In April, I told you Netflix's current rapid sub and revenue growth was due to their password sharing lockdown; converting account sharing subs to paying subs; and that they would RUN OUT of freeloading subs to convert, this month. Hey, guess what? They've run out of password sharers to convert - this month. That is a big reason why - despite good numbers in 2Q - their projections for 3Q and 4Q are so flaccid.
I've been saying for a year Netflix’s ad tier launch has been a failure. Now, another Head of Ad Sales is heading for the exits - the second high ranking exec (specifically brought in to launch the ad tier) to get shown the door in the last 12 months. More importantly, Netflix continues to play hide & seek with the number of subs on its ad tier. All they say is that ad tier subs are up 34% in the last quarter.
In May, Netflix announced they had 40 million monthly active users on their ad tier. I am always confounded by that metric. If we assume 2.5 people per account, Netflix’s 40 million MAUs equates to 16 million ad tier subscribers. When Amazon flipped the switch on their ad tier, they created 100 million ad tier subs, more than six times more than Netflix.
Netflix has had a good 2024. But winning the Streaming Wars may well turn out to be pyrrhic, and the rise they’ve been on may have hit a plateau. Wall Street seems to have noticed. Despite good 1Q results, market value has been flat-to-down. Even Netflix seems anxious about password sharers running out - projecting slower sub growth for the rest of the year.
Turning to results from more traditional TV players…
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