Video streaming services pioneer Netflix has seen its subscriber and earnings growth surge in the second quarter of 2024 amid a popular lineup of programs, forays into advertising and its controversial crackdown on password sharing among users. The recently released numbers show a company steadily gaining momentum after it lost a notable number of subscribers through the first two quarters of 2022 before pivoting its business strategy.
Data shows that Netflix gained eight million subscribers between April 2024 to June 2024, representing a 37% year-over-year increase and marking the sixth consecutive quarter that the video streamer’s growth in subscribers exceeds the past year. This trend began in 2022 after the California-based company lost a significant number of subscribers for the first time and took the event as a wake-up call.
Netflix’s Q2 2024 profits increased by 44% from the same quarter in 2023 to hit $2.15 billion while its revenue went up by 17% to reach $9.56 billion, both exceeding profit and revenue estimates from a FactSet Research poll of analysts. Even so, Netflix management predicts that the company’s revenue during the third quarter of the year will grow at a slightly reduced pace of 14%, 4% slower than the 18% growth rate analysts predict.
Although Netflix essentially pioneered video streaming and has been at the helm of the industry for most of its existence, competition has been becoming increasingly fierce recently. With most major production companies launching their video-streaming services over the past several years, the streaming market is becoming quite crowded. Services such as Amazon Prime and Disney+ are now giving Netflix a run for its money, especially now that Netflix has lost incredibly popular shows, such as Friends.
As competition in the video-streaming space heats up, Netflix will have to take extra steps to retain and attract more subscribers and boost its profitability. One of the steps the streamer has taken to increase profitability has been cracking down on password sharing to prevent freeloaders from using the service without paying. Netflix also decided to introduce a lower-priced subscription tier with commercials to increase revenue.
In the two years since Netflix instituted these two measures, its subscriber count has grown by a whopping 55 million to bring its global subscriber count to around 278 million. The company expects the gains it made from cracking down on password sharing to taper off and will focus its efforts on selling more commercials on its lower-priced tier. Spencer Neumann, Netflix chief financial officer, notes that ads will become a significant source of revenue for Netflix sometime in 2026.
Other companies, such as Momo Inc. (NASDAQ: MOMO), can derive lessons from the journey of Netflix in the video-sharing space and see how they can avoid some of the pitfalls that have made Netflix stutter over the years, and copy those measures that have helped the company stay at the top for so many years.
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