For the first time ever, Netflix has surpassed a legacy studio in Corporate Demand Share (demand for all original TV content produced under a company’s corporate umbrella), signaling a pivotal shift in the entertainment landscape. According to data from Parrot Analytics, Netflix claimed 9.6% of the demand for original TV content in Q3 2024, edging out NBCUniversal, which stood at 9.0%. This marks a significant milestone for Netflix, a company that only launched its first original, “Lilyhammer,” in 2012, overtaking a media giant whose TV programming dates back to the 1940s. This development not only highlights the rapid growth of Netflix but also underscores the long-term licensing potential of its vast content library.
AD-SUPPORTED TIER AND LIVE EVENTS STRATEGY
In the absence of subscriber metrics, Netflix will need a new narrative to present to Wall Street. The company is betting on its growing ad-supported tier to drive long-term revenue. Currently available in 12 markets, including the U.S., the ad tier offers pricing flexibility for consumers and an additional revenue stream for Netflix. This shift is part of a broader strategy to attract a wider audience, with a particular focus on live events.
The final quarter of 2024 will mark Netflix’s most ambitious foray into live sports, with high-profile events like the Mike Tyson-Logan Paul fight and two NFL Christmas Day games. These events are expected to set viewership records for Netflix, but the company’s true test will be in converting these sports viewers into long-term subscribers. Whether fans of athletes like Patrick Mahomes and Lamar Jackson stay for Netflix’s popular series like “Bridgerton” and “Love is Blind” will shape the company’s future in live entertainment.
CHURN RATES AND EXCLUSIVE CONTENT
As subscriber growth stalls across the industry, churn rates become a critical metric. Parrot Analytics reports that Netflix’s churn rate in the UCAN region (United States and Canada) declined in Q2 2024, while competitors like Max and Peacock saw increases. With UCAN being the most lucrative and saturated market for streaming services, Netflix’s ability to retain subscribers here is essential to maintaining its competitive edge.
One key factor contributing to Netflix’s lower churn rate is its high percentage of exclusive content. As of earlier this year, 87.3% of Netflix’s content was exclusive, a figure that leads the industry (excluding Apple TV+, which has an almost entirely exclusive library). This level of exclusivity is crucial for Netflix to keep its audience engaged and prevent them from drifting to rival platforms.
ORIGINAL CONTENT SUPPLY DECLINES ACROSS THE INDUSTRY
Demand for original content plays a significant role in subscriber growth, yet the global supply of streaming originals has seen a marked decline. In fact, Q3 2024 represents the sixth decline in seven quarters for original programming releases. The slowdown is attributed to a combination of factors, including the aftermath of Hollywood strikes and strategic shifts by major studios away from expensive, high-risk original projects.
Despite the overall downturn, Netflix remains the dominant player in the original content space. In Q3 2024, 21.2% of all new streaming originals were Netflix productions, a significant increase from 14.0% in the same period last year. Amazon Prime Video came in second with 13.1%, followed by Disney+ at 9.6%. This dominance is largely due to Netflix’s deep pipeline of content, a focus the company has maintained even as competitors scale back their investments.
SUCCESS OF LICENSED AND INTERNATIONAL SERIES
In addition to original content, licensed broadcast series continue to perform exceptionally well on Netflix. In Q3 2024, shows like "Grey’s Anatomy" (ABC), "Seinfeld" (NBC), and "NCIS" (CBS) made up just 1.0% of Netflix’s U.S. catalog but accounted for 7.0% of total demand. By contrast, international series, which make up 61.7% of Netflix’s U.S. supply, contributed 27.8% of the demand.
Looking ahead, Netflix’s most successful international original, "Squid Game", is set to return in December. The release of "Squid Game" Season 2 will be a crucial test of whether Netflix can sustain the success of non-English content, a key pillar of its international growth strategy. If the new season can replicate the demand of the original, it could open doors for other non-English content to gain a stronger foothold in the U.S. market.
Analyzing supply share is crucial for assessing a streamer's long-term viability. Netflix’s supply share of all streaming original premieres ticked down slightly in Q3 2024, but it remains the dominant player in this space. As recently as Q3 2021, Netflix accounted for 30.2% of all new streaming original titles released globally. Fast forward to Q3 2023 and Netflix’s share of new streaming originals worldwide was down to 14.7%.
However, Netflix reversed this trend big time starting in Q4 2023, and has accounted for over 20% of all new streaming original releases in three of the past four quarters. This coincided with Netflix’s first increase in originals demand share since before 2020. This was clearly the result of Netflix having a deep roster of new content in the can — something co-CEO Ted Sarandos emphasized repeatedly in 2023 — and a more global footprint than its competitors.