How will Netflix grow once it can no longer add new territories?
How will Netflix grow once it can no longer add new territories?
There aren’t many countries left for Netflix to expand into, which begs the question of how it will expand in the future.
Does Netflix ever get tired of winning? The undisputed victor of the Streaming Wars reported its quarterly earnings on July 18, showing that it surpassed $11 billion in total revenue during a quarter for the first time. While the company has stopped disclosing its total number of subscribers, Netflix had over 300 million worldwide customers at the end of 2024, and things are looking pretty good for the streamer overall. But Netflix’s current success begs the question: how much bigger can the company get? Netflix is already essentially available to anyone in the world with an internet connection, so how does it continue to increase its revenue to keep shareholders happy? We take a look at what the future might hold now that the company can’t simply expand geographically to increase profits.
Key Details:
- Nowhere left to go: Netflix is already available in 190 of the 195 countries around the world.
- Raking it in: The streamer wants to double the revenue it earned in 2024 by 2030.
- New content sources: Acquiring smaller streamers and pulling content creators from social platforms could be key to Netflix’s survival.
Thanks to the fact that Netflix pioneered the field giving it a substantive head start in streaming, the platform is already available in 190 of the 195 countries in the world, meaning that there’s just not much more room to stretch its legs in that regard. Since the world’s largest streamer is already available in the largest high-dollar markets around the world, it needs to come up with new ways to increase revenue beyond the relatively simple plan of just showing up in a new country.
That isn’t to suggest that Netflix doesn’t have lofty revenue goals in mind. The streamer is looking to double its annual revenue by 2030, and it also wants a market capitalization of $1 trillion by that date. Not bad for a company that was once deemed foolish for pivoting away from physical media.
Despite being essentially tapped out in terms of markets to expand into, there are still opportunities for Netflix to bring in more revenue. First and foremost, its ad business is still generating only a small portion of its total income. Data from Visible Alpha, as cited by The Wall Street Journal, shows that Netflix is expected to generate approximately $3.9 billion in ad revenue this year, which is forecast to amount to less than 9% of its full-year revenue.
Having just launched in late-2022, 15 years into the service’s streaming era, there are many longtime customers, who have avoided opting for the lower-priced ad tier. However, as of last November, half of all new subscribers are signing up for ad-supported plans.
As the Netflix ad experience continues to become more ingrained in its subscription options, the company is likely to see more current customers willing to exchange watching a few commercials for a lower price. This benefits the company in multiple ways. First, as the number of ad-supported users increases, so does its dual-revenue opportunities. While the monthly subscription fees paid by a customer decrease, the total revenue increases thanks to the ad dollars generated. Then, the more people that are on ad plans, the more that Netflix will be able to charge companies to advertise on the platform.
Therefore, look for Netflix to continue to push its ad plan world wide. Whether that means that the service continues raising the price on its ad-free plan (more on this momentarily) while keeping the ad-supported option relatively cheap, or improving the ad experience to the point where customers don’t mind watching commercials nearly as much, the streaming giant will likely continue pushing its ad-supported product for the foreseeable future.
On the other side of the ad conversation is how many ads the company puts into its product. Netflix already puts more commercials into its original titles than its licensed ones. While difference is currently on a fairly moderate scale, viewers should not be surprised to see Netflix slowly increase the number of ad breaks that it inserts into shows and movies. While this is a delicate balance for streamers as they don’t want to go too far and turn users off to either the ad experience or the platform as a whole, this is a fairly low-effort way to increase revenue that will likely become slowly more prevalent moving forward.
As previously mentioned, price increases are obviously in the streamer’s future, as well. Not only will natural inflation move subscription costs higher, but other companies’ needs to turn a profit will likely aid Netflix as well, despite the fact that Netflix long ago reached consistent profitability. Currently, Netflix has one of the cheapest ad-supported streaming plans on the market at just $8 per month, while the ad-free options ($18 and $25 per month) are on the upper end of the industry.
However, with all of the coverage provided by streamers like Disney+ and Peacock raising prices annually, Netflix likely has room to increase its rates without causing a huge outcry. Not only will this move help drive up subscription revenue, but it also might make the most cost-conscious consumers switch from ad-free to the cheaper ad-supported option, helping increase the increasingly important ad revenue discussed previously.
While these types of financial machinations have long been general operating procedure for streamers, Netflix also has to find ways to keep boosting engagement if it wants to remain the unstoppable juggernaut that it is today. The WSJ cites data from Michael Morris of Guggenheim that estimates that Netflix viewership fell 1.5% in June and 2.5% in July.
So, how will Netflix attempt to increase its engagement numbers when it is already the largest subscription streamer in the world? While the platform already has the most robust library in the industry, becoming a one-stop streaming shop could help. While Netflix is already fairly aggressive in acquiring licensed titles, there is a more permanent way to attract fans looking for nostalgic binge-watches. In the wave of consolidation that many analysts expect is soon to hit the streaming industry, a major acquisition of a smaller, competing streamer like STARZ or AMC+ could do wonders for Netflix’s catalog.
Both of those platforms have a wealth of bingeable series; STARZ is the home of “Outlander,” its forthcoming spinoff, and the continually expanding “Power” Universe, and AMC+ streams “Mad Men,” “Interview With the Vampire,” and every incarnation of “The Walking Dead” in the decades-old franchise. All of these series have long been fan favorites, but as has been seen with shows like “Suits,” “Grey’s Anatomy,” and “NCIS,” Netflix’s massive userbase is often drawn to long-running licensed shows, pushing them up the weekly charts. Since these series have dozens of episodes across numerous seasons, they serve as a consistent title for fans to return to the platform to watch, either for the first time or the 10th time.
As companies are beginning to realize how difficult it is to succeed in the streaming world, there is little doubt that streaming will begin seeing an increasing number of mergers, acquisitions, and closures. Due to its size and standing in the industry, Netflix is uniquely positioned to absorb some of the faltering platforms, either completely or just by purchasing their catalogs. Look for Netflix to become more aggressive in acquiring titles, because while it can be costly, licensed titles are still much cheaper than producing originals, and still tend to dominate Nielsen's streaming ratings, regardless of how old they are.
But, as we said, acquisitions like this can be expensive, so it might a better use of Netflix’s funds to bring in creators, rather than fully realized shows, by looking to social video for new stars Netflix has already gotten a bit of a head start in this regard; data released earlier this year showed that the beloved kids’ entertainment star Ms. Rachel was streamed for almost 3 billion minutes between the end of January and the beginning of May on YouTube. Episodes of Ms. Rachel’s show are also available on Netflix, giving the streamer another flagship program to attract families.
There’s plenty more grist to grind if Netflix wants to go after more YouTube and TikTok stars, and these creators already have a huge following among younger demographics that are watching on-demand streaming services less than they are social video. Streamers know this quite well; that’s why Prime Video was so keen to produce the Mr. Beast competition series “Beast Games,” despite the controversy that dogged that series through production.
By capitalizing on the established fame of these internet personalities, Netflix can not only lure their fans to the platform, but can also avoid spending as much on marketing. YouTube is by far the most dominant streaming service in the world, and while its approach to streaming is far different than Netflix’s, don’t be surprised if the latter takes a page from the former’s playbook, at least when it comes to its stars.
Thus far, we have primarily discussed how Netflix can spend money to increase engagement, but will a pullback on content spending also be in the cards for Netflix? Now that the company has essentially reached worldwide market saturation, does it need to keep spending billions and billions of dollars annually to attract customers? While an argument could likely be made that it can slow down its spending, We don’t think this type of de-escalation is in the immediate plans for the streamer. For one thing, Netflix chief financial officer Spencer Neumann said earlier this year that the $18 billion the streamer plans to spend on content in 2025 is nowhere near its ceiling. The streamer probably won’t think about cutting back on its originals budget unless it has an even stronger permanent library to fall back on.
One area where Netflix could also spend itself into more viewers and higher advertising dollars is live sports, but that’s a hard road to travel. The cost of sports rights is so high that Netflix has to be very careful about what it pursues, especially since it also has a philosophy of not chasing sports it can’t turn into big-time viewing events like its Christmas Day NFL games. Netflis has been extremely successful in “eventizing” every sporting event it has aired, including this month’s boxing match between Katie Taylor and Amanda Serrano, which was the most-watched women's sporting event in the United States so far this year.
While we wouldn’t expect to see Netflix get involved with bidding on every available sports rights package anytime soon, further collaborations with the NFL, WWE, and boxing promotions, and perhaps luring the WWE's corporate sibling UFC away from ESPN could all be extremely financially beneficial options for the service.
There are paths to growth for Netflix to be sure, but the streamer has to keep making careful, calculated steps forward. It is already at the top of the streaming world, but it has to keep swimming if it wants to survive in a world where every other streamer would like nothing better than to dethrone the king.
Netflix
Netflix is a leading subscription-based video streaming service that offers on-demand access to an extensive library of over 3,000 movies, 2,000+ TV shows, and a growing collection of acclaimed Netflix originals. Renowned for producing groundbreaking content, Netflix has become a cultural powerhouse with hit originals like “Stranger Things,” “Wednesday,” “Squid Game,” “The Crown,” “Tiger King,” “Bridgerton,” “The Witcher,” and “Black Mirror.”