1. Netflix Keeps Growing

Netflix, the only streaming service to actually turn a profit, surprised Wall Street this week by adding way more subscribers than expected, a whopping 13.1 million of them, mostly outside of the US-Canada market, which saw 2.81 million new subs.

The unanswered question—Netflix does not break down its subs into the sorts of buckets that make analysis easy—is how many of those new subs came from ad-supported tiers and how many came from password sharing crackdowns.

It seems fair to say that a decent enough number were from the ad-supported tier, which added 8 million new subscribers since November 2023. While that’s not a 1:1 number—some new subs may be switching from ad-free—it’s close enough to understand where many of those new subscribers may be coming from.

While not all was rosy in Netflix-land—per share earnings were lower than expectations—Wall Street was unfazed and the results sent Netflix stock skyrocketing.

And in case the stellar subscriber numbers were not enough, Netflix announced a deal to televise WWE wrestling’s “Raw” in 2025. 

Why It Matters

Netflix has a number of things going for it. It’s everyone’s first streaming service, the one you get before any of the others.

It has planted its flag in every country on earth save China, Russia, North Korea and Syria.

And it still works as a way to break library series to a new audience, Suits being the most recent example. 

Netflix has also been clever about shifting the focus of its programming from “HBO-like” series to more mainstream ones.

This was bound to happen as the audience for streaming became more mainstream. It’s why the first Golden Age of Television came to an end too. You see, in the 1950s, televisions were expensive and thus largely owned by the sorts of affluent, educated people who wanted to watch shows like Judgement At Nuremberg and Marty. As prices came down and the audience grew, shows needed to appeal to a much broader base, and so we had Petticoat Junction and The Beverly Hillbillies. 

Streaming is similar in that the bulk of the early audience was more educated and upscale and looking for “HBO-like” shows—hence Netflix’s early hits like Orange Is The New Black, BoJack Horseman and Narcos. But that audience has shifted and if you look at Netflix’s recent self-reported ratings, it turns out that two very mainstream hits—Ginny & Georgia and The Night Agent—are at the top of the pack.

Because that is what the largest number of people want to watch and what they consider “good.”

And so kudos to Netflix for understanding that and heading in that direction while simultaneously doubling down on mainstream network and cable hits like Suits and Young Sheldon. 

Which is why Netflix was largely absent from the Emmys this year.

You know where they were very present though? The Oscars, and it seems as if their plan is to offer high caliber films rather than high caliber TV series. I suspect they have data somewhere that shows that Maestro is stickier than Succession, and/or that the profits to be made from movies are higher than those from high-end TV series.

One more move Netflix is making is to increase the price gap between ad-free and ad-supported: they announced that they are doing away with their lowest ad-free tier. 

This is important if you look at the user journey to signing up.

There’s a series on Netflix I really want to watch so I sign up. If I can watch the series ad-free for just $5/month more, that’s a no-brainer, especially if it is the sort of series I will enjoy more without ads.

But if that price gap is $20/month or even $30/month, I may just decide that ad-free is not worth it.

So we’re going to be seeing that, and we’re going to be seeing lots of bundle deals that only involve ad-supported Netflix—take the one from Verizon where ad-supported Max and Netflix are just $10/month.

What You Need To Do About It

If you are Netflix, I suspect none of this is news to you, but here goes:

You need to look at getting “real” sports, like the NFL or NBA, something that will make your service indispensable to tens of millions of fans. That may not make sense financially, but it’s something you should look at as a Netflix with say, NFL games, will be something few fans will want to get rid of. Granted, there is an argument that says the appeal of pro sports is fading and that NFL rights won’t matter as much to Gen Z. But that’s a long way off and you still have to get through the next 20 to 30 years.

Ditto news. You have a real opportunity to launch your own global news network, something completely different from the stuck-in-the-90s cable news networks of today.

That is, no doubt, a massive undertaking fraught with risk, but it could really pay off in droves, plus the world needs something like that right now.

From a business perspective, the stickiness that sort of service would create is huge.

Because what you need to do right now is to be the place where people feel they can get pretty much all their TV needs met, rather than “a really great add-on to broadcast and cable TV.”

To that end, it may be worth it to take a fresh look at your interface, with the notion that having categories that sound more like brands/channels and less like broad classifications (“Romance” “Drama”) are more valuable to consumers. Sort of what you used to do in the old days with categories like “Dark Movies Starring Dark-Haired Women” and the like.

And finally, because I am going to keep recommending this until you do it, linear channels for your library content, especially on the ad-supported version. People like linear channels, it keeps them watching longer which means they see more ads, and it makes the service that much more user-friendly.

But like I said, you already knew all that.

2. Peacock’s Potential Churn Issue

Much has been made over the fact that NFL fans who wanted to see last weekend’s playoff games had to subscribe to Peacock in order to watch the Chiefs-Dolphins matchup.

For some, it was a brilliant move on the part of Comcast that would help create awareness of all of Peacock’s programming and help them gain subscribers.

For others, it was just the TV and pro sports industries being greedy and forcing fans to pay more money for something they traditionally got for free, or at least included in their already overpriced cable bundle.

And everything in between.

New data from Antenna, a company whose data we tend to trust, estimates that 2.8 million new viewers subscribed to Peacock in advance of the playoff game.

That brings Peacock’s total subscriber numbers to 31 million, a key piece of the good news delivered during Comcast’s Q3 earnings call this week, which included such tidbits as Peacock’s overall loss was down to $825 million, down from $978 million a year ago.

Yes, in the weird economics of streaming, only losing $825 million is considered a good thing.

That said, the real stat everyone in the industry is watching is how many of those nearly three million viewers can Peacock keep. How many will unsubscribe this month and how many will quit over the next few months, people being somewhat lazy about that sort of thing and all.

Why It Matters

Comcast has a number of positive things going on: the new Xumo OS and app, and the fact that Peacock’s gross revenue now exceeds $1 billion.

In terms of programming, right now Peacock mostly has movies going for it: they are the only place you can watch Oscar nominee The Holdovers for free and will soon be the only place you can watch Oppenheimer for free as well. 

That’s all well and good, but for many consumers, spending $6 to rent those movies from Amazon (which they will be able to do several weeks after the movie premiers on Peacock) may well be worth the extra wait.

On the other hand, if Peacock can keep giving viewers a reason to stick with them, the playoff gamble might just work.

Ad-supported Peacock is just $6/month, a price point that might convince many viewers to keep them around as a spare. For others, the $12/month premium plan may be worth it in that it gives them access to their local NBC affiliate live, 24/7, thus giving them access to local news and sports should they actually decide to cut the cord for good.

It has not gone unnoticed that this is a potential end game for local broadcast, to be included in Peacock, Paramount+ and Hulu, though they would have to be available to both ad-free and ad-supported viewers and even then it’s unclear whether the economics would actually work. 

Would there be enough ad revenue to make keeping those stations afloat worth it, and, if that were not 100% the case, would the networks be able to pull the plug on some but not all of their local affiliates without Congress and/or the FCC getting all up in arms about it?

That’s the existential question that floats around the media-company owned streaming services.

On a more immediate basis, there’s the question of whether live sports is worth the investment overall and whether it can create the sort of long-term subscriber growth these companies are hoping for.

We will find out over the next few months as we see the amount of churn Peacock is experiencing. 

What You Need To Do About It

If you are Peacock, here’s some free advice: strike as many bundling deals as possible with the MVPDs. Having you and your sports rights as part of any streaming bundle they may offer is going to be a huge win for them. It will also make churn a non-issue.

Given that you already own the largest cable company, you are that much further ahead on this plan too, and the traction that creates should convince others to jump on board too.

Also, if you are not already planning to do so already, some serious reaching out to new subscribers is in order. You know who watched that Dolphins-Chiefs game. Give them a whole lot of love so that they are not tempted to unsubscribe this month. You want to keep that positive number flow going and you don’t want the negative press that will come from news that you lost most of the people you signed up. 

Remember that sports fans are generally an unhappy bunch these days, what with having to subscribe to all sorts of different services to watch their favorite teams, and so anything you can do to make them feel more valued is going to pay off big time.