Netflix's global sub base to expand to 325M by 2025 – analyst

OTT service expected to deliver strong subscriber growth in emerging, 'mobile first' markets, with the catch of much lower average revenues per user.

Jeff Baumgartner, Senior Editor

February 19, 2020

4 Min Read
Netflix's global sub base to expand to 325M by 2025 – analyst

Aided by consumer uptake in emerging, "mobile first" markets, Netflix is poised to expand its global paid subscriber base to 324.85 million by the end of 2024, a top industry analyst predicts.

Netflix will have 257.98 million international streaming subs heading into 2025 including 66.86 million in the US, Michael Nathanson, analyst with MoffettNathanson, predicted in a report that takes a fresh look at Netflix's global potential. By way of comparison, Netflix ended 2019 with 167.09 million streaming subs worldwide, 61.04 million of which were in the US.

His revised forecast represents a 2% rise from a prior forecast of 65.36 million subs by the end of 2024 in the maturing and saturating US market, and a 12% gain internationally when compared to a previous estimate of 229.57 million subs.

A general lack of international competition from major, US-based streaming players "presents a long and open green field of opportunity for Netflix to keep growing outside the US," Nathanson explained in the report, issued Tuesday.

While Disney is the primary exception with its new, expanding Disney+ service, WarnerMedia's HBO Max service isn't expected to hit regions such as Latin America and Europe until 2021. Meanwhile, NBCUniversal has said little about the international potential for its coming Peacock service beyond what will be offered via Comcast-owned Sky. ViacomCBS has not pinpointed its global streaming plans, but could expand on that Thursday, when it posts Q4 results.

Although Netflix has the potential to broadly expand its base over the next five years, Nathanson believes the streaming giant will also face financial challenges as it spends heavily on content tailored for international markets. He also believes that Netflix will generate average revenues per user (ARPU) that will fall well short of what Netflix now enjoys in the US and Canada.

Nathanson breaks down Netflix's global growth potential into three basic buckets:

  • Clones of the US: English-speaking, wealthy markets with high broadband penetrations that look like the US (e.g. Australia, the UK and the Nordics).

  • Local Language Giants: Foreign-language, local content markets that are also wealthy with high broadband penetration (e.g. South Korea, Japan, Italy and France).

  • Mobile First: Emerging markets, such as India and parts of southeast Asia, that are less wealthy with lower broadband penetration.

The mobile first 'game-changer'
Among its global opportunities, mobile is the "real game-changer for Netflix" in markets such as India and Southeast Asia where the service is not highly penetrated, Nathanson explained. The catch is that Netflix will be forced to "promote low-cost mobile plans to attract users in these emerging markets," he added.

That mix shift to mobile-only subs in emerging markets will also cause ARPU to decline.

While Nathanson expects Netflix ARPU to be in the neighborhood of $16.62 in the US and Canada and $12.40 in the Europe, Middle East and Africa (EMEA) region by the end of 2024, he expects it to be just $9.68 in the Latin America region and $8.39 in the Asia-Pacific region.

Fueling global growth carries a price
Netflix's commitment to developing and growing its international business will bring a lot of subs in the door. But fueling that effort will also come at a high cost when factoring in elements such as programming, marketing and other overhead costs needed to build and maintain a global infrastructure that underpins the business.

"Putting it all together, we project Netflix's worldwide cost of revenues to more than double from $12.4 billion in 2019 to $25.7 billion in 2024, representing a CAGR of +16%," Nathanson predicted.

Although Nathanson is bullish on Netflix's upside on international subscriber growth, he kept his "Neutral" rating on the stock, but raised his target price by $80, to $290.

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— Jeff Baumgartner, Senior Editor, Light Reading

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About the Author(s)

Jeff Baumgartner

Senior Editor, Light Reading

Jeff Baumgartner is a Senior Editor for Light Reading and is responsible for the day-to-day news coverage and analysis of the cable and video sectors. Follow him on X and LinkedIn.

Baumgartner also served as Site Editor for Light Reading Cable from 2007-2013. In between his two stints at Light Reading, he led tech coverage for Multichannel News and was a regular contributor to Broadcasting + Cable. Baumgartner was named to the 2018 class of the Cable TV Pioneers.

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