Industry Insider: Is Netflix Still On Top?

On July 18, 2024 Netflix hosted their Second Quarter Earnings Call on YouTube where they held a Q&A session with Spencer Wong, Vice President of Finance, Investor Relations, and Corporate Development, along with Co-CEOs Gregory Peters and Theodore Sarandos, and Chief Financial Officer Spencer Adam Neuman. An earnings call is a quarterly conference call hosted by a public company, such as Netflix, during which its executives discuss the company's financial performance, business developments, and future outlook with investors. 

From evolving streaming technology to creating pop culture phenomenons, Netflix is no stranger to commanding the entertainment industry. And in the Second Quarter Earnings Call, they made sure to reveal their strengths. The Netflix executives noted that, according to Nielsen’s The Gauge: Share of US TV Screen Time, YouTube and Netflix are the dominant players in the industry with each having more viewing minutes than Disney Plus, Hulu, and Prime Video combined. The second quarter promotes these claims: “We had a strong Q2 with 17% revenue growth and an operating margin of 27% vs. 22% last year. We now expect a full year 2024 reported revenue growth of 14% to 15%.” 

While these numbers are certainly positive, they aren’t exceptional in the so-called “streaming wars.” With Netflix dominating the industry thus far, it was to be expected that there would be a more prominent swell of revenue, especially after the end of the WGA and SAG-AFTRA strikes and the pandemic. After the first quarter, Netflix’s shares dropped 4% because of the predicted figures of the second quarter, which at that time was a 16% growth, compared to just 13% to 15% for the full year. Meaning, there is still room for improvement – which Netflix already has plans for. 

Their biggest opportunity, according to the executives, is winning the larger share of the 80% of TV time (from linear and streaming) that neither YouTube or Netflix have. Their plan is to improve their entertainment offering by establishing themselves in newer areas such as games, advertising, and live services as well as continue to improve and expand on existing content. The Netflix executives even stated what lacks in their competitors, claiming that “the challenge for so many of our competitors is that while they are investing heavily in premium content, it’s generally relatively small viewing on their streaming services and linear continues to decline.”

Netflix clearly has the advantage in the streaming wars with their massive and somewhat loyal subscribers. Media conglomerates such as Paramount and Warner Bros. Discovery are clearly trying to keep up with Netflix with, as the executives describe, their premium content; Warner Bros. Discovery, for example, continues to promote new original content, such as the House of the Dragon, Hacks, Succession etc., and are still struggling to make profit and relieve debt. 

In Q2, Netflix continues to prove that their massive output along with their large subscriber base – which consists of 278 million households and around 600 million  individuals –  is what keeps them at the top streaming hierarchy. For example, the Bridgerton universe has generated 172 million views with the release of the two-part season three that had 98.5 million  views. Netflix also gained 107 nominations across 35 series including The Crown, Baby Reindeer, Ripley, 3 Body Problem, and much more. They even garnered their first live nomination with the hit The Greatest Roast of All Time: Tom Brady.  

The second earning call also explored some new frontiers. First, they are designing a new TV homepage: “This new interface provides more visible title information at a glance — including synopsis, genre and ratings… [and] title previews are also larger and more dynamic, with more immersive trailers and bigger box art to make browsing easier.” 

They also addressed the ongoing questions regarding advertising. It has been evident that subscriber growth has been slowing down for Netflix, thus it is crucial for the company to support revenue by scaling the advertisement sphere. With the added ads tier to their subscription service they have created additional profit –  the subscription tier now accounts for 45% of all sign ups in their ads market. There have also been new frontiers in the advertising realm with the creation of an in-house ad tech platform which they will launch broadly in 2025. 

Ultimately, Netflix continues to lead the streaming industry, as highlighted in its second quarter earnings call with strong financial performance and new strategic innovations. While the 17% revenue growth isn’t as strong as many were expecting, the streaming platform still reaffirms its dominance in other ways. Netflix's expansion into new areas like gaming, advertising, and live services shows promise. With a robust subscriber base of 278 million households and a diverse content slate, Netflix is well-positioned to maintain its top spot while continuing to address market challenges and capturing more TV viewing time​.