Netflix is Already the World’s Largest Streamer, So Where Can it Find Growth?
Data released by the streamer in a shareholders letter provides some clues as to where it can make more meaningful expansions.
As rival streaming executives looked on with envy, Netflix unveiled its fourth quarter 2023 earnings report on Tuesday. The company revealed it had more than 260 million subscribers around the world, but in a letter to shareholders it also announced which countries could potentially see a greater investment of time and money as Netflix tries to increase its subscriber base and viewership share in them.
- In markets like Mexico, Spain, Brazil, and Poland, streaming makes up less than 25% of total TV viewing.
- As the strongest streaming brand in the world, Netflix is in an excellent position to increase penetration in these countries.
- The streamer is already expanding the amount of titles it produces internationally, and subscribers should expect that to continue.
Where Can Netflix Go Next?
Despite its largesse in terms of subscribers, Netflix accounts for less than 10% of total TV viewing in every country that it is available. Considering the amount of television content available around the world, that shouldn’t be seen as a flaw for Netflix, but it does show that the streamer still has room to grow, especially outside of the United States and Canada where it already has more than 80 million combined customers.
The company knows this well, and on Tuesday laid out some of the territories that it feels are most ripe for expansion. Brazil, Mexico, Poland, and Spain are all markets where Netflix accounts for 5% of total TV viewing time or less, and each of these countries has adopted streaming at a meaningfully slower rate than the U.S. and the United Kingdom, where streaming accounts for almost 40% of total TV watching.
Two of these countries are Latin American, and Netflix has already begun making inroads there. The Brazilian Report indicates that Netflix’s decision to crack down on password sharing in Latin America led to a 3% increase in average revenue per member (ARM) in the region, and though the average income in these territories is lower than that of the U.S. and Canada, Netflix will no doubt see an opportunity to increase the ARM of $8.85 for Latin American subscribers to more closely resemble its North American number of $16.29.
How Will Netflix Increase Subscribers and Revenue Worldwide?
In its shareholder letter, Netflix said that it can continue to grow by employing a “better slate, easier discovery and more fandom.” Deploying its Standard with Ads plan in more territories will also help; all of the countries mentioned have access to the plan, but it has not yet expanded to all of the 246 countries in which Netflix is currently available. That plan brings in significantly more money per user than ad-free plans do, as Netflix gets to collect both subscription revenue and ad revenue for each customer.
Will an increase in locally-produced content also help Netflix gain share in other territories? The share of Netflix originals made in the United States has already fallen below 40%, but surprisingly data from Plum Research and Omdia shows that no territory, besides the U.S. and South Korea, spends more than 50% of total Netflix viewing time watching originals that were produced in its specific market. In fact, locally-produced originals don’t account for even 20% of watching hours in any other surveyed nation.
That would indicate that Netflix would be best served by adding shows that attract as global an audience as possible, instead of zooming in on a particular territory and shifting productions there to get more people interested in a subscription. That will help it gain a meaningful share in countries where its penetration is lower currently, as well as help it keep engagement high in territories where its share of viewing time and subscriber bases are larger.
Despite the already-imposing size of Netflix, it has not reached its subscriber ceiling yet. It has plenty of opportunities to add more customers around the world, particularly in areas like Latin America and Europe where new content and the expansion of its Standard with Ads plan could be big drivers of new growth for Netflix.
Netflix
Netflix is a subscription video streaming service that includes on-demand access to 3,000+ movies, 2,000+ TV Shows, and Netflix Originals like Stranger Things, Squid Game, The Crown, Tiger King, and Bridgerton. They are constantly adding new shows and movies. Some of their Academy Award-winning exclusives include Roma, Marriage Story, Mank, and Ma Rainey’s Black Bottom.