Netflix (NFLX): A few areas of focus in the streaming giant’s growth plans

Shares of Netflix, Inc. (NASDAQ: NFLX) stayed red on Friday. The stock has gained 44% year-to-date. The streaming giant continues to experience strong momentum across its business, with solid growth in revenue, profits, and subscribers. It is continuously working on driving engagement by developing and expanding its content slate across genres and regions. The company believes it has plenty of room for further growth across streaming, games, and advertising. Here are a few key areas that it is focusing on to drive this growth:

Content and engagement

Netflix continues to see strong engagement from viewers. In the second quarter of 2024, its global streaming paid memberships grew around 17% year-over-year to over 277 million. Paid net additions totaled 8.05 million.

In its Q2 earnings report, Netflix said that based on data from Nielsen, streaming accounts for 40% of total TV time in the US and that Netflix and YouTube were the clear leaders in the streaming space. As per Nielsen data, Netflix holds an 8.4% share in US TV screen time, just behind YouTube which leads with 9.9%.

In order to drive engagement, Netflix continues to invest in developing a strong content slate. Its shows such as Bridgerton, The Crown, Baby Reindeer, and Blue Eye Samurai all remain extremely popular. The company’s efforts in developing content across various genres and tailoring them for different regions have proved beneficial. Its content slates in the UK and India have been particularly strong this year.

Despite some near-term headwinds from the paid sharing initiative, Netflix’s engagement has remained steady. For the third quarter of 2024, the company expects paid net adds to be lower than the year-ago period, which had the first full quarter impact from paid sharing.

Advertising

Advertising allows Netflix to offer lower prices to consumers while also creating an additional revenue and profit stream for the business. The company’s ads tier now accounts for over 45% of all signups in its ads markets. Ads tier membership grew 34% sequentially in Q2 2024.

Netflix is working on scaling its ads business. It is working on increasing ads relevancy, targeting personalization, better measurement, and incrementality. It is building its own ads server, which it will launch in Canada this year and then in the rest of its ads markets in 2025. Although Netflix does not expect advertising to be a key contributor to revenue growth in 2024 or 2025, it expects it will contribute to revenue and profit growth over the long term.

Games

On its last quarterly call, Netflix said that gaming is a big market at almost $150 billion ex China and Russia, and excluding ad revenue. As it nears three years into its gaming initiative, the company is pleased with its progress. It tripled its gaming engagement in 2023 and continues to see good growth in 2024. Netflix has launched 100 games so far and it has more than 80 games in development. The company believes there is significant opportunity for growth in this space.