Netflix is growing rapidly and hollowing out the traditional TV business
With its rapid growth, Netflix is increasingly becoming a threat to traditional television channels. According to its own figures, the streaming market leader gained 13 million customers in the last quarter and is now watched in 260.3 million households worldwide.
With this tailwind, Netflix is getting serious about live entertainment: The weekly wrestling show "Raw" from the WWE league is moving to the streaming service after 30 years on linear TV.
The financial details of the deal were not disclosed - but according to information from the financial service Bloomberg, Netflix is paying five billion dollars for the WWE programs over a period of ten years.
Shift in favor of streaming
The deal makes it clear how much the balance in the TV business has shifted in favor of streaming. The US broadcasting group NBC is missing out on a reliable magnet for viewers and advertising - while sport is the most important reason for Americans to still afford an expensive cable TV subscription. The wrestling league hopes to eventually become more popular outside the US via Netflix's global base. At Netflix, co-head Ted Sarandos expects advertising dollars to follow WWE shows to his platform.
Netflix made a risky bet last year, but it seems to have paid off. Around 100 million households watched Netflix without their own subscription - using the access data of friends or relatives. When the service asked such freeloaders to pay, it could have backfired: After all, there are plenty of other streaming services to migrate to. But the Netflix program proved attractive enough for many people to pay instead.
Advertising despite subscription
The crackdown is helping to drive the growth in user numbers. The new, cheaper subscription with advertising is also playing a major role: in the twelve markets in which it is available, 40% of new customers are opting for it. Netflix is removing the only slightly more expensive basic subscription without ads in more and more countries. If you want to watch ad-free, you have to pay significantly more.
For the current quarter, Netflix predicted slower growth in the number of users than in the previous quarter. At the same time, however, potential hits such as the second season of the Korean series "Squid Game" are coming out this year, which could provide a new boost.
Quarterly sales increase by over 12 percent
Quarterly revenue rose by 12.5 percent year-on-year to just over 8.83 billion dollars, as Netflix announced after the US stock exchange closed on Tuesday. Profit amounted to 938 million dollars - compared to 55 million dollars in the same quarter last year. Investors were impressed: the share price rose by more than eight percent in after-hours trading.
Last year as a whole, Netflix made a profit of 5.4 billion dollars. This is a stark contrast to the business of many other streaming services, which are often in the red. For some competitors, such as Apple and Amazon, the actual core business generates so much money that they can easily accept streaming losses. But Disney, Paramount and NBC, as Hollywood studios and TV broadcasters, have made streaming a cornerstone of their business strategy - while cinema and traditional television are sometimes bumpy.
The Hollywood rivals tried the strategy of keeping their productions exclusively for themselves in order to make their streaming services more attractive. But this only worked to a limited extent. They are now sharing more shows with Netflix again. This led to the NBC series "Suits" becoming another streaming hit several years after it ended. (SDA/swi)
