Small Screen: Netflix Q3 2023 Earnings Recap

Key Takeaways:

• Netflix significantly beat 3Q23 net subscriber adds estimates, driven by the success of its paid sharing rollout over the past few months, while also meeting and exceeding 3Q23 street estimates for revenue and EPS, respectively. Per ST data, Netflix mobile app downloads increased 5% QoQ in 3Q23, inline with a 4% QoQ increase in reported global streaming paid memberships

• Netflix again boasted its industry-leading user engagement, touting its stickier and more engaged users vs other SVOD providers. ST data largely corroborated these statements: Netflix had the largest number of power users (those opening the app +15 days/month) in 3Q23 at 14% vs <8% for Hulu, Disney+, Prime Video, Peacock, and Paramount+. Netflix also had the highest user time spent at 104 mins/wk in 3Q23 vs <86 mins/wk for the other studied SVOD apps. Netflix’s scale, both in the size of its user base and engagement levels, will likely help the company remain competitive in the advertising space for SVOD providers

• Although Netflix’s advertising business is still quite young (<1 year as of this report), Pathmatics by ST data shows some impressive momentum for the company’s appeal as a top SVOD channel: 7/10 of the largest categories of advertisers on Netflix in 3Q23 increased US ad spend by an average of 63% QoQ, while Hulu saw an average decline of 15% QoQ across 7/10 of its largest advertiser categories in the same period

  • Continued momentum in scaling its ad business and building out lucrative partnerships and sponsorships for key pieces of IP and live events could also help drive top line growth. Looming price increases also appear to be geared towards driving more users (both new and existing) towards the significantly cheaper Standard with Ads plan ($7/month vs $15.49/month without ads)

• Netflix (-10% YoY) and Hulu (-17% YoY) saw the sharpest declines in 3Q23 YoY MAU growth as new content struggled to ignite consumer interest. Fresh Netflix offerings faced challenges in capturing consumer attention in the same vein as Stranger Things or Squid Games. Disney+ 3Q23 MAUs fell slightly (-2% YoY) as Star Wars-IP inspired Ahsoka struggled to hit the mark. Prime Video (+2% YoY) and Peacock (+4% YoY) both saw slight increases in 3Q23 MAUs due to live sports streaming, while Paramount+ (+35% YoY) saw the most outsized growth, driven by various European launches over the past year

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