Netflix is emphasising its “strengths” in audience engagement and quality content to advertisers as Amazon enters the ad-supported streaming race next week with the launch of ads on Prime Video.
During the company’s fourth quarter earnings call on Tuesday, investors queried how the streaming service was positioning itself against new competition from Amazon, which has a much larger ad business and established relationships with brands.
Netflix co-CEO Greg Peters said the streamer’s investment in “culture-defining films, series and live events” is “an important place for brands to be” and “differentiates us from our competitors.”
Earlier on Tuesday, Netflix announced a 10-year deal with the WWE to air weekly wrestling show Raw from January 2025. As part of the $5 billion agreement, Netflix will also own the rights to stream WWE’s other shows and specials outside the U.S.
Raw has been a staple of linear TV programming since it first debuted in 1993. It currently airs on the USA Network, where it brings in 17.5 million unique viewers a year, according to a press release.
Co-CEO Ted Sarandos said the deal “feeds our desire to expand our live event programming” and “should also add some fuel to our new and growing ad business.”
“Most importantly, fans love it. For decades, the WWE has grown this multigenerational fan base that we believe we can serve and we can grow. We believe that WWE has been historically under-distributed outside of North America and this is a global deal so we can help them and they can help us build that fandom around the world,” he said.
Sarandos said the deal forms part of Netflix’s $17 billion programming budget for 2024.
Amazon’s Prime Video content slate, on the other hand, is perceived to be lower quality than its streaming rivals, according to a recent Wall Street Journal report. But the company has the unique advantage of linking up streaming ads to conversion on its flagship retail platform, building on a trend that advertisers are already investing in.
Netflix’s ad business remains in its infancy; Peters said one of the company’s top priorities is growing its technical ad features, including its targeting and measurement capabilities and the variety of ad products it offers.
He also noted hiring more sales and ad operations staff will help the company “be better partners with advertisers.”
Netflix shared at the Consumer Electronics Show earlier this month that it has surpassed 23 million global monthly users of its ad-supported tier—up from 15 million users two months ago.
Ad revenue remains a small part of Netflix’s business, however. “We’ve still got years of work ahead of us to take the ads business to the point where it's a material impact to our general business,” Peters said.
He ruled out expanding Netflix’s ad-supported offering beyond the 12 countries it currently operates in for now, adding, “Never say never.”
Peters also called out the size of the connected TV market, expected to have reached $25 billion in global ad spend in 2023, to demonstrate that “there’s room for multiple players, clearly.”
Earnings snapshot
Netflix’s argument about its competitive strengths was helped by a quarter of strong subscriber growth. Despite increasing subscription prices and cracking down on password sharing, Netflix added 13 million net new streaming subscribers in the final quarter of 2024, representing 13% year on year growth.
Subscriber growth was strongest in Europe, the Middle East, and Africa, where it added 5 million members, followed by 2.9 million in Asia-Pacific, 2.8 million in the U.S. and Canada and 2.4 million in Latin America.
Revenue grew 12.5% to $8.8 billion in the quarter and net income of $938 million was far ahead of the prior year quarter—when Netflix posted profit of just $55 million—though its income slowed down throughout the year.
Netflix is forecasting a sizable jump in profits in the first quarter of 2024 to $2 billion and revenue of $9.2 billion. In its letter to shareholders, it said it expects “healthy double-digit” revenue growth for the full year 2024.
Netflix’s stock jumped more than 8% in after-hours trading.
