Netflix headquarters in Los Gatos, California.
Netflix’s financial results are doing well.
According to the 2023 Q4 results released on January 23 (local time), the number of global subscribers exceeded 260 million, with an annual growth rate of 12.8%.The growth rate from October to December 2023 is the highest everdid. The fourth quarter results showed sales of $8.8 billion (approximately 1.3 trillion yen), operating profit of $1.5 billion (221.6 billion yen), and net income of $900 million (132.9 billion yen).
There are two factors supporting this strong performance.
- Growth in Asian content, including the live-action version of Yu Yu Hakusho, which was a huge hit around the world
- Increase in users due to stricter ban on account sharing
These two factors drove the strong financial results.
The two areas that Netflix expects will be its future growth pillars are “live sports” and “advertisement business.”
Regarding live sports, the company will invest a huge amount of $5 billion (approximately 738 billion yen) over 10 years in a partnership with the American professional wrestling organization WWE, and will start streaming live sports in the United States and other countries from January 2025.
As competition in distribution services intensifies, what kind of survival strategy is the company looking for? It was analyzed from three perspectives.
(1) “Yu Yu Hakusho” is also a big hit, and international content procurement is a strength
Until now, Netflix has differentiated itself and grown by creating a large number of original works. This policy is still in place, but what is starting to become a particularly big point of differentiation is “non-English” content.
Netflix sources a lot of its content from Hollywood, but it also sources a lot from other countries, such as Japan and South Korea.
until nowKorean content including “Squid Game” was strong.However, in 2023, hits from a wider variety of countries are increasing.
Among them, a big hit involving Japan is the popularity of the live-action drama version of “Yu Yu Hakusho” (distribution starts on December 14, 2023).
After the film was released, it debuted at number one on Netflix’s viewing time rankings. As of January 21st, it had reached 193 million views.
The live-action drama version of “Yu Yu Hakusho” became the most viewed drama in the world the week after its release.
The record of “Yu Yu Hakusho” is one of the most popular non-English works, and is even mentioned in the financial results materials.has been done.
Although it has not been released for a long time and its cumulative viewership is lower than that of long-running popular series, it can be said to follow in the footsteps of Alice in Wonderland in terms of international hits.
In addition, anime works from Japan are also doing very well. In the rankings from January 15th to 21st, two works were ranked in the global non-English/TV category: “Demon Slayer: Kimetsu no Yaiba” and “Dungeon Meal.”
Japanese anime works also performed well in the world’s top 10 rankings dated January 23rd.
Although the company procures content globally, it focuses on “creating good works that are hits in individual countries first,” and this policy was followed in the case of “Yu Yu Hakusho.” This is also mentioned in the author’s interviews.
This policy is working effectively in terms of strengthening the company’s base, which is the core of the company.
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(2) Obtaining a contract with WWE and moving to live sports streaming
Netflix has partnered with American professional wrestling organization WWE, and will begin exclusive streaming from 2025.
As part of our content strategy, a major future investment will be in “live sports.”
Netflix has partnered with professional wrestling organization WWE (World Wrestling Entertainment). Starting in January 2025, WWE’s popular series “RAW” and other series will be exclusively distributed in the United States, Canada, the United Kingdom, Latin America, and other countries.
Netflix plans to expand distribution to other countries, and as a major partner of WWE, various WWE content will be provided through Netflix.
Ted Sarandos, co-CEO of Netflix and head of content initiatives, expressed confidence, saying, “WWE’s popularity is centered on North America. Through our partnership, we can increase our fan base around the world.” .
Ted Sarandos, co-CEO of Netflix.
In the past, Netflix has had the experience of expanding the popularity of F1 itself in the United States by producing an F1 documentary series that became a hit in the United States. This time I’m trying to do the opposite.
The partnership with WWE is a 10-year deal worth $5 billion.
This huge deal is symbolic for Netflix. Up until now, the company had distributed sports documentaries and other content, but had not done any “sports broadcasts.”
Until a few years ago, founder Reed Hastings listed it as one of the things we don’t do.That’s right.
However, among distribution companies, the competitive axis is now becoming “sports.” Amazon has an 11-year, $13 billion deal for the broadcast rights to the NFL, a professional football league. With its competitors using sports as a weapon, Netflix probably saw a need for it as well.
What is also symbolic is that WWE has always said,broadcast” has been our main battleground. Signing a contract with Netflix has a large element in making us aware of the shift from “broadcasting to distribution”.
Netflix presented the following information in its financial results. This shows the viewing share of video streaming in living rooms in each country.
From Netflix’s financial results. He argues that streaming usage still accounts for less than half of people’s daily lives, and that their “rival is broadcasting.”
The total does not add up to 100%, but the rest is “broadcast”. The argument is that broadcasting still has a large market share, and that the source of future growth will be for each company to seize that share.
(3) The number of users will increase after the account sharing problem is resolved, and advertising will start contributing to profits from 2025
Netflix itself has over 260 million subscribers. The following is a trend in the number of members based on the company’s financial results, and it can be seen that the growth in the number of users has recovered from the fall of 2023.
By region, Europe has seen the most growth, and Asia, including Japan, is catching up with Latin American countries. However, membership growth in Asia is slowing.
The reason for the increase in membership is an increase in the number of additional users joining due to the explicit prohibition of “account sharing.”
Greg Peters, co-CEO of Netflix.
During this period,Netflix has not implemented any noticeable price increases and has focused its efforts on reducing account sharing.It is assumed that this measure was particularly effective in Europe and other countries, leading to an increase in the number of users.
Greg Peters, co-CEO of Netflix and in charge of system initiatives and user experience, explained the company’s policy as follows.
“From now on, we need to increase the number of users and expand the advertising business. However, it is important to improve the experience and make the service better over the next few years.
With better engagement, you can build a large, profitable advertising business,” Peters said.
Netflix will discontinue its ad-free “Basic Plan” in countries where it operates advertising services, including Japan.The low price planAds are the basicsand viewing without ads is only available on Standard (1,490 yen per month) or Premium (1,980 yen per month).
Three plans offered in Japan.
The company’s long-term strategy is to strengthen the content measures mentioned above, improve its services, and increase the number of members, which in turn will increase revenue from advertising.
For this reason, Netflix does not expect full-scale growth in revenue from advertising until 2025. WWE’s distribution will begin in 2025, and the company estimates that it will be around this time to reap the benefits of “customers who are still focused on broadcasting.” It seems likely that the prediction will come true.
(Edited by Yutaro Kobayashi)
Source: BusinessInsider
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