• by Wayne Friedman , April 19, 2024

Overdelivering once again -- and cementing its dominant control over the streaming TV business -- Netflix posted 9.33 million new global paid subscribers in the first quarter of 2024, up 16% versus the fourth quarter of 2023. 

This resulted in a total of 269.6 million global subscribers and 82.7 million in the U.S. and Canada. 

This increase in key metrics is largely attributable to “free” subscription sharers who have made the transition to paying Netflix subscriptions. 

Revenues also beat industry estimates, growing by 15% growth to $9.37 billion year-over-year.

Netflix offered similar guidance in revenue for the second quarter -- up 16% to $9.5 billion.

Netflix also continues to reap big benefits from its $6.99-a-month "Netflix With Ads" option, with subscribers rising 65% year-over-year in the fourth quarter of 2023, and 70% in the first quarter of 2024. “And we expect more room to take price post upfronts,” writes Laurent Yoon, media analyst for Bernstein Research.

Netflix says that 40% of all sign-ups in its ad markets come from its ad plan. 

In the U.S. and Canada -- with a net growth of 2.5 million subscribers (up 11%) -- that would mean 1.0 million went to its ad option plan. The company did not disclose its total number of ad-option U.S. and Canadian subscribers. 

Netflix in March had a 8.1% share of all U.S. TV viewing, according to Nielsen -- steadily rising from 7.2% in October 2023.

Going forward, Netflix looks to move beyond password sharing efforts “to lean heavier into local-language/locally-produced content across international markets where penetration rates are lower,” says Yoon. 

Continuing to show strength, “we believe there’s a plausible runway to continue to see net-sub growth hold up in the 15% to 20% year over year range outside the U.S./Canada tied to these efforts.”

Analysts believe all this continues to put the pressure on streaming competitors that are desperate to find a way to achieve stable profitability.

Jeff Wlodarczak, CEO and media analyst at Pivotal Research Group, writes: ”While not necessarily needed by Netflix, we believe other streaming players/media players will have no choice but to continue to sell their premium library content to Netflix to offset their own poor returns in streaming... which enhances the value of Netflix service allowing it to drive higher subscriber growth, reduce churn and increase ARPU.”

Netflix's global average revenue per user (ARPU) per month may be a disappointment to some analysts, inching up only 1% to $11.90 in the first quarter -- except for the U.S. and Canadian subscribers, which rose 7% to $17.30 in the first quarter from $16.64 in the fourth quarter.

Bernstein estimates global ARPU will slowly rise from $11.90 in fiscal 2024 to $12.50 in fiscal-year 2025.

Yoon pondered the question of where Netflix goes from here in terms of its "full" stock price. “When comparing the health of the business to our media coverage peer group, it’s easy to justify a premium valuation,” he says. 

Going forward, however, that calculation may be tougher for investors to determine. Netflix said it would not disclose or offer guidance on the number or gains and losses in subscribers or ARPU measures.

“In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential,” says the company in its quarterly shareholders letter.

“But now we’re generating very substantial profit and free cash flow (FCF)... It’s why we stopped providing quarterly paid membership guidance in 2023 and, starting next year with our Q1 '25 earnings, we will stop reporting quarterly membership numbers and ARM [Average Revenue Per Month].”