Companies
18/10/2024

Netflix's Growth Trends Shape The Future Of Global Streaming Industry




Netflix's performance in the third quarter of 2024, while impressive, reflects larger trends that may influence the entire global video streaming industry. The company added 5.1 million streaming subscribers during the quarter, surpassing Wall Street expectations by over a million. These results indicate continued strength, but also highlight new challenges for both Netflix and the broader streaming sector.
 
While Netflix's share price rose 4.8% in after-hours trading following the earnings report, concerns loom over the slowing pace of subscriber growth. The company’s strategies, particularly its pivot towards ad-supported plans, higher revenue per user, and profitability, provide a glimpse of the changing priorities that may shape the streaming landscape moving forward.
 
Slowing Subscriber Growth: An Industry-Wide Issue
 
Netflix's subscriber additions outpaced expectations, yet they were still far below the 8.76 million new users gained in the same period last year. This deceleration raises questions about the saturation of streaming services in key markets, particularly in the U.S., where the platform appears to be approaching its growth ceiling.
 
"A steep decline in net new subscribers is what’s concerning. While there’s room for net subscriber growth internationally, in the U.S. things are getting tapped out," noted Forrester analyst Mike Proulx.
 
This dynamic isn't unique to Netflix; other streaming platforms are facing similar pressures in mature markets. As companies begin to hit the upper limits of their subscriber bases, the focus is shifting from rapid expansion to maximizing revenue through other channels.
 
The Global Push for Ad-Supported Models
 
One significant way Netflix is evolving is by emphasizing its ad-supported tier, which accounted for more than 50% of signups in markets where it was available during the third quarter. While Netflix has traditionally avoided ads, this move reflects a broader trend across the industry, as more streaming services embrace this model to appeal to budget-conscious consumers and tap into new revenue streams.
 
Magalie Grossheim, senior equity research analyst at M Science, highlighted the growing success of Netflix's ad-supported option, stating, "In our data, we continue to see that the selection rate for the ad-supported plan is accelerating in a lot of the mature markets."
 
Ad-supported streaming models are increasingly becoming a focal point for platforms worldwide. Disney+, Hulu, and Max (formerly HBO Max) have all launched ad-based plans as they attempt to attract more users and diversify income. For the global industry, this could represent a major shift, as companies seek to balance high-quality, premium content with the affordability of ad-supported services.
 
However, Netflix doesn't expect advertising to become a significant growth driver until 2026, indicating that it is still in the early stages of this transition. The company's cautious approach underscores the complexity of integrating ads into streaming, which requires careful planning to avoid alienating its core customer base.
 
International Expansion: A Key Battleground
 
As Netflix reaches subscriber saturation in the U.S., the company, like its competitors, is turning to international markets to fuel growth. The global streaming industry is increasingly focused on regions such as Asia, Latin America, and Africa, where broadband infrastructure and smartphone penetration are rapidly expanding.
 
Netflix's international ambitions are exemplified by its investment in diverse content like Korean dramas, which have proven to be major hits. The upcoming release of *Squid Game* Season 2 in late December is expected to drive further subscriber growth around the holidays. This strategic focus on local content appeals to both domestic and international audiences, positioning Netflix as a global content powerhouse.
 
By leveraging local stories with global appeal, Netflix sets a precedent for how streaming platforms can succeed in international markets. Competitors like Disney+, Amazon Prime Video, and Apple TV+ are following suit, investing heavily in regional content to capture the next wave of global viewers.
 
The competition for international dominance is intensifying, as streaming platforms vie for subscriptions in diverse regions, each with unique cultural preferences. This trend will likely continue to define the global streaming landscape as companies increasingly tailor their offerings to regional markets.
 
Engagement and Pricing: The New Metrics for Success
 
In light of slowing subscriber growth, Netflix has shifted its focus to engagement metrics, emphasizing the importance of how long users spend watching content. The platform reported that engagement averaged two hours per day per member, a key metric for assessing its success in retaining viewers.
 
Meanwhile, Netflix is also experimenting with pricing models, raising prices in Spain, Italy, and other European markets. The company aims to drive revenue growth through higher subscription costs, without sacrificing user engagement. This strategy, if successful, could set a precedent for other platforms seeking to balance profitability with user retention.
 
Ted Sarandos, Netflix's Co-CEO, reinforced this approach, stating, "We had a plan to re-accelerate the business, and we delivered on that plan."
 
The global streaming industry is paying close attention to Netflix’s pricing experiments, which could influence how other companies structure their own subscription models. While price increases may help boost revenue in the short term, they must be carefully balanced to avoid driving users to cancel or switch to competing services.
 
Sports and Live Events: A New Frontier for Streaming
 
Another emerging trend in the streaming industry is the integration of live events, particularly sports. Netflix is increasingly exploring live sports as part of its strategy to attract advertisers and deepen engagement. In November, Netflix will stream a fight between YouTube star Jake Paul and Mike Tyson, followed by two National Football League games on Christmas Day.
 
Live sports have traditionally been the domain of cable TV, but streaming platforms are now beginning to recognize the value of offering these events. As Netflix experiments with this model, other streaming giants, such as Amazon Prime and Apple TV+, are also investing in live sports rights. This trend is poised to become a major growth area for the global streaming industry, offering new opportunities for advertisers and engaging millions of sports fans worldwide.
 
Global Implications for Streaming
 
Netflix’s performance and strategic shifts signal key trends that will likely shape the future of the global video streaming industry. Slowing subscriber growth, the rise of ad-supported models, international expansion, and the integration of live events all point to the ways in which streaming platforms are evolving to maintain relevance in an increasingly competitive market.
 
While Netflix continues to innovate and expand, its actions also serve as a bellwether for the broader streaming industry. As companies around the world adjust their strategies to these new realities, the next phase of global competition in streaming will be defined by how well platforms can balance growth, engagement, and profitability in a rapidly changing digital landscape.
 
(Source:www.straitstimes.com) 

Christopher J. Mitchell
In the same section