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Streaming star. How Netflix re-conquers Wall Street
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Netflix struggle with sherring passwords returned the company to the pandemic pace of growth in subscribers. The reporting reported last week was much better than forecasts. We say that analysts of Western investment banks think about the long -term prospects of the Netflix business and whether there are more prospects for the growth of the streaming service that have gone by rise in price over the past 3.5 months.
How Netflix reported and what investment banks write about this
According to the results of the fourth quarter of the 2023th, Netflix reported the strongest growth of subscribers from the first quarter of 2020, when the pandemic began. Their number increased by 13.1 million against the expected Wall Street 8.9 million. The results were very strong, despite the fact that the expectations were high, analysts of all investment banks agree.
We found and studied the reports of four investment banks that came out after the results of Netflix:
- Morgan Stanley (MS)
- Barclays
- JP Morgan
- Bank of America (Bofa)
In the past two years, Netflix has been rebuilt to find new drivers for growth, MS analysts say.
- One of the main factors in the number of subscriptions in the last quarter and in 2023 in general was the opportunity to share a subscription for an additional fee (paid shering), which the company launched last year, writes JP Morgan analysts. The company disconnects users who come under one account from different addresses. Last year, this helped the company to increase the number of subscribers in the United States after a couple of years of stagnation, Bloomberg noted . According to JP Morgan, paid shering provided 13 out of 30 million net subscriptions in 2023.
- The second, albeit less important, growth factor, is the growth of the popularity of the cheapest plan with built-in advertising, which the company gradually launches in different markets starting in the fall of 2022 (now there are 12 such countries). According to the results of the fourth quarter, about 40% of new users in the markets, where there is an option to select a subscription with advertising, choose it against a 30% quarter earlier, according to JP Morgan. At the same time, the company removed the base plan (the cheapest plan without advertising) for new subscribers and raised prices for it in the UK, the USA and France. However, these indicators are even worse than Disney (closer to 60%).
Agreement with WWE
In addition to the strong results for the quarter, the important news was the purchase of exclusive rights to show the WWE RAW page show for $ 5 billion for ten years since 2025. Netflix will show three online broadcasts per week, hoping to attract a large and loyal audience. This means that users will more regularly go to the Netflix website, which should like advertisers, explains The Wall Street Journal (WSJ). According to Nielsen, only 1.5–2 million people watched the RAW in the United States. The show leaves linear TV for the first time in 31 years, Analysts of JP Morgan noted.
This agreement corresponds to the strategic goal of Netflix to maintain a two -digit revenue growth rate over the next few years. Although historically Netflix usually fully owns the rights to products, this transaction is unique: WWE has a large fan base around the world, and the term of the agreement can be increased to 20 years at the request of the service. “Not a single entertaining company has never tried to create a programming of this scale for such a variety of [spectator] tastes and cultures,” the Netflix letter says. Streaming also buys the rights to content in other countries: since 2025, in addition to the United States, Streaming will broadcast WWE in the UK, Latin America and Canada.
Sports broadcasts are growing steadily in price, so Netflix secured favorable conditions for years to come. In addition, WWE is the most effective in terms of cost ratio and benefits of sports in the United States. For streaming, this is a profitable transaction, according to MS: the cost of WWE content is $ 2-4 million, and a new film can cost about $ 100 million per hour.
JP Morgan generally believes that the transaction brings Netflix closer to the status of “global TV”. According to analysts, 17.5 million unique spectators look annually, it is one of the most popular shows among the audience aged 18 to 49 years. Netflix, in their opinion, can bring RAW to a new level by the number of spectators. This deal is another example of how Netflix can use the advantage of its scale compared to competitors from the media industry who cannot or do not want to conclude such agreements, MS notes.