Netflix posts biggest quarterly subscriber gain due to sports, 'Squid Game'

By Lucas Shaw 

Netflix Inc. closed 2024 with its biggest quarterly subscriber gain in history, buoyed by its first major live sporting events and the return of Squid Game. 

The company added 18.9 million customers in the fourth quarter, according to a shareholder letter Tuesday. That was more than double what Wall Street expected and brought global subscribers at Netflix to more than 300 million. The company’s previous best was 15 million in the first quarter of 2020 — numbers driven by the onset of the coronavirus pandemic.  

This is the final time Netflix will report quarterly subscriber numbers. The company’s stock has historically risen and fallen based on customer additions, but management is trying to get investors to prioritize financial metrics like sales and profit. The company reported revenue grew 16 per cent to $10.2 billion for the quarter, the biggest gain since late 2021, and said sales will grow faster than predicted in 2025.

 

Netflix will boost sales by increasing prices in its home market. The company is raising prices in the US, Canada, Portugal and Argentina, with the most popular US plan going to $17.99 a month, an increase of $2.50. Netflix is also increasing the cost of its cheaper advertising-supported plan.

 

For the year, the company projects revenue of as much as $44.5 billion, a gain of 14 per cent from the year just ended, with an operating margin of 29 per cent.

 

Shares of the streaming leader rose as much as 15 per cent to $997.85 in extended trading after the results were announced. That would mark a new all-time high if it holds in regular trading on Wednesday.

 

Netflix will stop reporting subscriber figures following a surge in new customers from its crackdown on password sharing. Analysts and investors had expected the benefits from that effort to wear off by now, but Netflix just posted its single best year ever in terms of subscriber additions, netting 41 million new customers.

 

The company credited a mix of programming, including the hit movie Carry-On and the second season of Squid Game, its most popular series ever. The company said no programme accounted for a majority of its additions.

 

Yet a boxing match between Jake Paul and Mike Tyson delivered a record number of sign-ups for one day, according to the research firm Antenna, dwarfing even Netflix’s first National Football League games. The second of those games featured a halftime performance by Beyoncé. 

 

“Our newly established live programming slate has already delivered some must-watch moments,” the company wrote in its letter. “Although our live programming will likely be a small percentage of our total view hours and content expense, we think the eventized nature will result in outsized value to both our members and our business.”

 

Live programming is vital as Netflix builds out its advertising business. The company shows advertising during football and wrestling to all of its members — not just those on the less-expensive, advertising-supported tier.

 

The streaming giant got off to a slow start in advertising and has said it won’t produce material financial benefits until 2026. But it’s starting to make progress. The majority of new customers opt for advertising in the 12 markets where it is available, and the company said it would have enough scale to satisfy advertisers by the end of this year.

 

Management has eschewed buying the rights to most major sporting events, arguing they are too expensive. Yet it did license the rights to the FIFA Women’s World Cup and is seen as a potential partner for the Ultimate Fighting Championship.

 

“We’re constantly trying to broaden our programming,” co-Chief Executive Officer Ted Sarandos said during an interview with analysts after the results were announced. Netflix has had less success with video games, another new initiative.

 

This quarter, Netflix is forecasting revenue of $10.4 billion and earnings of $5.58 a share, both below the average of Wall Street estimates. Netflix has rebounded from a brief downtown a couple of years ago to post record growth while many of its peers in Hollywood have cut costs and struggled to grow.