Content is king! Netflix (NFLX.US) has once again won the "streaming game".

Tuesday, Netflix (NFLX.US) solidified its dominant position in the streaming video market by combining live sports events, popular returning series, and unique content such as Beyonce's NFL halftime show, helping it attract a record number of users during the holiday season. In this context, Netflix released record fourth-quarter earnings, with revenue and profits once again exceeding analyst expectations, and added billions of dollars to its share buyback program. User Growth: Relying on Quality Content The streaming pioneer added a record 18.91 million net new users in the quarter, a 44% increase year-over-year, more than twice the expected 9.18 million, bringing its global user base to over 300 million. Growth in these numbers exceeded 70% year-over-year in three regions, including its more mature domestic market of the US/Canada (adding 4.82 million, or 72%, compared to an expected 1.75 million). User growth in the Asia Pacific region was 70%, Latin America grew by 77%, and Europe/Middle East/Africa markets added 5 million, a 1% decline year-over-year. The company's previous best record was 15 million in the first quarter of 2020, driven by the outbreak of the pandemic. Netflix attributed its record membership growth to "broad content strength, product/market fit improvements in all regions, and typical seasonality for the fourth quarter." It also attracted new sign-ups due to recent key content changes, including the second season of its hit series "Squid Game" and the arrival of major sports events such as the boxing match between Mike Tyson and Jake Paul, WWE Raw, and Christmas NFL games. The success of the second season of "Squid Game" also drove subscription growth, making it the platform's largest premiere to date, with 68 million views in the first week alone. According to research firm Antenna, the boxing match between Jake Paul and Mike Tyson set a record for registrations, even surpassing Netflix's first NFL game. The company stated that this event attracted 1.08 billion viewers globally, making it the largest sports event in history in terms of viewership. The global average viewership for the two NFL games Netflix hosted on Christmas reached 30 million, becoming the most-watched football game in history. Earlier this month, Netflix also added WWE "Raw" live. Mike Proulx, head of research at Forrester Research, stated, "It's obvious that content is driving user engagement with streaming services. With the largest subscriber growth numbers, Netflix's focus on high-quality content is a major reason for its strong performance this year and in the fourth quarter." Meanwhile, Netflix announced that this would be the last quarter it reports user numbers, as the company will focus on sales and profits. Previously, its crackdown on password sharing led to a surge in new users. Analysts and investors had expected the benefits of this effort to gradually diminish, but Netflix just announced its biggest year of user additions ever, adding 41 million new customers. Seeking Alpha analyst Brett Ashcroft Green responded, "It will take a quarter to break down how many new subscribers are due to organic content additions and how... In terms of price increases, Netflix stated, "As we continue to invest in programming to provide more value to members, we occasionally ask members to pay a bit more so we can reinvest further to improve Netflix. For this reason, we are adjusting prices for most plans in the US, Canada, Portugal, and Argentina today (affecting our 2025 guidance provided in October 2024)." In the fourth quarter, Netflix's increasingly important ad-supported service accounted for 55% of registered users in the country, with ad-supported plan membership increasing by 30% compared to the previous quarter. Building on this success, the streaming company announced an additional ad-supported membership plan to expand its footprint in 10 out of 12 "advertising countries." Last November, Netflix launched its first-party ad technology platform in Canada. Live programs such as sports events are also crucial to Netflix's expansion in the advertising business. The company shows ads to all members during football and wrestling matches, not just those on lower-priced, ad-supported plans. The streaming giant is planning to enhance its core business further in 2025, launching more series and movies, improving user product experiences, while continuing to develop the advertising business. Additionally, the company will delve into live events and gaming. In 2025, Netflix will see the return of popular series like "Stranger Things" and "Wednesday," which are expected to further attract users and drive growth. The company has secured the broadcast rights for the FIFA Women's World Cup in 2027 and 2031. Netflix stated that this deal showcases its strategy of offering special event programs rather than regular sports programs. Monetization: Price Increases Alongside Advertising Netflix will increase its prices in the US, Canada, Portugal, and Argentina. The price hike announced on Tuesday will raise the standard monthly fee without ads from $15.49 to $17.99, while the standard monthly fee with ads will increase by $1 to $7.99. The premium package with the highest price, including 4K video quality, will increase by $2 to $24.99. Regarding the price increase, Netflix stated, "As we continue to invest in programming to provide more value to members, we occasionally ask members to pay a bit more so we can reinvest further to improve Netflix. For this reason, we are adjusting prices for most plans in the US, Canada, Portugal, and Argentina today (affecting our 2025 guidance provided in October 2024)." In the fourth quarter, Netflix's increasingly important ad-supported service accounted...The advertising sector is slow to start and is expected to not generate substantial economic benefits until before 2026. However, it has already made progress. Most new customers in 12 markets choose advertising plans, the company said that by the end of this year, it will have enough scale to meet the needs of advertisers.The company wrote in the letter, "Our newly established live broadcast program has already provided some must-see moments. Although our live broadcast program may only account for a small portion of our total viewing time and content costs, we believe that this balanced nature will bring tremendous value to our members and our business." Analyst Tim Nollen of Macquarie Securities predicts that as more people sign up for the company's advertising-supported plan, and as Netflix's advertising technology matures, Netflix's ad revenue this year will increase to $20 billion, with live events continuing to drive user sign-ups. As streaming services increase monthly costs and push users towards lower-priced ad-supported plans to increase profitability, this price increase is the latest for consumers. In recent years, companies like Walt Disney Company, HBO, Peacock, Apple Inc., and others have raised prices. Netflix last raised its standard package price in 2022. Seeking Alpha analyst Max Greve said, "This is almost a home run. The company's performance outshines others. The price increase demonstrates management's confidence in their continued focus on pay-sharing and ad-centered approaches. This confidence is justified as subscriptions remain strong. Some of the strongest growth has been in the US and Canada region, which is their highest revenue region. To be honest, such reports are hard to feel optimistic about. One concern may be the scale of sports programming and whether sports programming will dominate entertainment programming as it has on cable television. But this is speculation, and as the market reaction clearly shows, management's strong execution over the past 30 years has benefited them from such doubts." Nevertheless, the surge in advertising and paid subscriptions solidifies Netflix's dominant position in the streaming field. In recent years, as traditional cable TV and broadcast business shrinks, traditional media companies have invested billions to launch their own streaming services to compete with Netflix. While some competitors, including Walt Disney Company and Warner Bros Discovery, have recently turned a profit in the streaming field, they have struggled to match Netflix's market share. Netflix is the most subscribed OTT streaming service in the US, accounting for 30.8% of total OTT subscription revenues in the US. Therefore, Netflix leads in SVOD (subscription video-on-demand) revenue. PP Foresight analyst Paolo Pescatore said, "Netflix has strengthened its leadership position in the streaming market, it is certainly ahead. Compared to competitors, it is now showcasing its strength by adjusting prices, as its program lineup is much stronger and more diverse." Profit Margin The company reported a 16% increase in revenue this quarter, reaching $10.2 billion, its largest increase since the end of 2021, and indicated that sales growth will be faster than expected by 2025. This growth will be partly driven by price hikes. As the company continues to downplay quarterly membership and revenue forecasts, profit margins are increasingly under scrutiny - its fourth-quarter operating margin was 22.2%, significantly higher than a year ago's 16.9% (but still the lowest margin since the fourth quarter of 2024; the third-quarter margin was 29.6%). Netflix expects an operating margin of 28.2% in the first quarter of this year, slightly higher than the 28.1% of the first quarter of 2024. Netflix expects first-quarter revenue to be $10.4 billion, earnings per share of $5.58, both slightly below Wall Street's average expectations. The company also expects revenue to reach $44.5 billion this year, up $5 billion from previous guidance, a 14% increase from the previous year, with an operating margin of 29%. The company also stated that its stock buyback program will increase by $15 billion, bringing the total authorization to $17.1 billion. Last year, Netflix repurchased 9.9 million shares of stock for $6.2 billion. Assuming no major fluctuations in foreign exchange, free cash flow is expected to reach around $8 billion by 2025, with content cash expenditures estimated at around $18 billion.