THB #696: Netflix Q1 2025

Here’s what I have to say about that…

Nice quarter. Nothing particularly impressive or problematic. Netflix has become, like all entertainment media companies with a large and solid foundation, a bit boring.

Here is the quarterly and here is the previous quarterly.

Netflix hit $10 billion a quarter in revenue for the second time, 2 quarters in a row. The quarterly net came closer to $3 billion than ever before and they project it to cross that threshold next quarter.

This is the first time that Netflix has not offered extensive information on subscriber numbers, which is makes these reports pretty empty (as hard as the team works to make them perfect each quarter). Any conversation becomes reduced to “how much did they make and how much did they net?,” which is obviously the first question, but doesn’t allow too much serious analysis.

How much more or less are they spending on content? How many ad-based subs and how many ad-free? How much revenue from ad sales and how much is projected moving forward? How much are they making per subscription? Where is the growth coming from?

Ha. Ha. Ha.

You can watch their 37-minute home video in which the key players say almost nothing while earnestly answering every question… questions without follow-ups… questions they ably dance around like matadors being chased by a bunch of incredibly smart but easily distracted bulls…

That set aside… as Netflix is a very successful company and they understand that Wall Street doesn’t actually understand or care about those pesky details, instead relying on a slew of analysts to tell them whether to buy or sell and at what price, without regard to the actual status of the company, but the delusional notion that this is still a tech company…

What really struck me about this moment in Netflix history is that the company has become a Rorschach test for writers, both analysts and those who cover the industry as media.

One of the pieces about the Netflix quarter that really caught me was Julia Alexander for Puck - who is back working under FOMO Finke, which undervalues her - with a piece called, “Netflix’s New Numbers Game,” which wanders through a field of different analytics companies and theories about Netflix.

What pushes my buttons to start is the idea that Netflix is in the game of causing changes in strategies and perceptions. I don’t disagree at all that Legacy companies have often foolishly followed the lead of Netflix, which has always been kind of like designing a submarine based on the design of an open-cockpit plane. What I don’t agree with is the idea that Netflix has been trying to lead the rest of the industry into the toilet. No question, the company is more than a little mercenary and could care less what happens to the others… but over these many years, what I think is pretty clear is that Netflix follows its own song, even when “they” are wrong.

“Now, the company is attempting to redefine success once again: Today’s quarterly results mark the first time that Netflix has not reported a subscriber growth number. Co-C.E.O.s Greg Peters and Ted Sarandos are trying to convince the market to forget all that came before and focus on what really matters: money.”

Netflix told us that it would be withholding subscriber data a year ago, in the Q1 2024 call. Honestly, I expected them to stop earlier… except it happened that the sub numbers were to their benefit in the last couple of quarters in particular.

But the marking has been on the wall for this last year, as the ad-based product has rolled out worldwide, that while sub numbers would likely rise, the average price paid would get lower, which seems to be the case. Also from Alexander…

Most research firms predict that Netflix’s subscribers likely fell this quarter, with Antenna estimating a loss of 670,000 total subs in the U.S. and Canada region. As I’ve noted before, the company has been maxed out in its home territory for years. Meanwhile, Bernstein analyst Laurent Yoon surmised that Netflix’s average daily engagement per subscriber in the region has remained relatively flat.

I don’t believe these research firms are pulling numbers out of their asses… but there is a lot of “surmising” without a lot of fact. Each of the companies uses somewhat different tools too “surmise,” including rumors, but there is a lot of leaping. And that is fine in the context of these companies selling estimated data so that others can measure twice and cut once as they try to be accurate in their own contexts.

But what drives me a bit crazy is the clear reality, as I listen to analysts before and after a quarterly like this, is that they are using the lack of real factual information to “prove” whatever postures they have taken before said quarterly.

“Always Wrong” Rich Greenfield has been right about one thing… the success of Netflix, more as a stock than as a company. But still, he gets his credit. But whatever happens in any quarter, when Rich pull his tongue out of Netflix’s corporate asshole, the only variation we can expect is exactly what shade of brown it will be.

Netflix is like a real-live version of the old Shimmer commercial from Saturday Night Live. Netflix is a floor cleaner AND a dessert topping or whatever else people can project on it.

One of the new rock stars of rationalization is that the Streaming business is no longer about subs, but about hours viewed… which is 100% true and 100% bullshit at the same time.

You can’t really have “hours viewed” unless you have subscribers to watch them.

The other newly minted rock star is that Netflix is now in competition with YouTube, not the other Streaming companies… which is just 100% bullshit.

Why? Simple. Because as Netflix is a different model than Legacy-Based Streamers and always has been, YouTube is a different model than Netflix and vice versa. For all the blather than production is getting cheaper (which it can) so the quality of non-pro content on YouTube is more like pro-content… it isn’t. And it never has been.

Netflix has mined some of the YouTube and Tik Tok talent for their shows… because teens that teens want to have sex with are the same in any visual format, though some can act and some can not. But we still have not seen a YouTube or Tik Tok show rise to the level of mainstream television (including Netflix). Moving an existing YT/TT hit to a different platform (Netflix) is a weird hybrid and God bless Netflix for taking the swing… but they are not the same.

It’s funny… Netflix keeps taking these fliers - as they should - in trying to do things like the rest of the industry. They seemed to be trying out doing pilots a couple years ago… that seems to be over. They talked about changing the pay structure for shows, paying less up front and giving up more backside to creators and talent… that seems to be over. Even the “we’re in the movie business” schtick… which leads to a lot of challenging films that would not be made with conventional funding (certainly not at those budgets)… has come back to Sarandos declaring, “Fuck off, cinemas.” (That isn’t a direct quote. Or indirect. Ha.)

Netflix has only one clear financial highway to ride to a major revenue increase… which is ads… and on which they are, like every Legacy-based Streamer has been forced to, taking their time.

Netflix “has proven that it can very effectively monetize that subscriber base. In other words, Netflix doesn’t have to surge its spending to acquire new subscribers to offset disappearing customers.”

No… no one does, as a matter of fact. But the primary reason they have stopped reporting subscriber info is that they do have to come up with more pricing options in other countries and they need to, since ads will soon be king for them, push more and more people to go for the with-ads options.

What I believe and have been writing for years now is that the price of ad-based subs will rise, but that the pricing on ad-free will rise a lot faster and by a much higher percentage, bifurcating Netflix and every other Streamer in the monied and the rest, perhaps to the point where ad-free is eliminated altogether in 5+ years.

The math is not complicated or challenging to the idea of who is on top of the heap or at the bottom. How much more can a Streamer make with an ad-watching sub than with an ad-free sub over the course of a month/year? If you are willing to pay $30 a month for an ad-free experience but ads bring in $25 + a $10 subscription fee, how long will anyone offer that $30 ad-free option?

But Netflix isn’t there yet and neither is Hulu, which has been offering ads/no-ads for the longest of anyone out there.

What happens when ESPN Streaming comes along and is ONLY offered as an ad-based streamer at a premium price of $25 a month or more? For me, this seems like a very, very important tipping point for the entire industry.