NFLX earnings name for the interval ending December 31, 2024.
Picture supply: The Motley Idiot.
Netflix (NFLX 1.35%)
This autumn 2024 Earnings Name
Jan 21, 2025, 4:45 p.m. ET
Contents:
- Ready Remarks
- Questions and Solutions
- Name Members
Ready Remarks:
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Good afternoon, and welcome to the Netflix This autumn 2024 earnings interview. I am Spencer Wang, vp of finance, IR, and company growth. Becoming a member of me at present are co-CEOs, Ted Sarandos and Greg Peters; and CFO, Spence Neumann. As a reminder, we might be making forward-looking statements, and precise outcomes might differ.
We’ll now take questions submitted by the analyst neighborhood, and we’ll start with our first query from Dan Salmon of New Avenue Analysis. Dan asks, “Given the necessity to guarantee security and well-being of solid and crews, has there been any disruption to your L.A. based mostly productions owing to the wildfires? If that’s the case, are you able to please quantify the influence on this yr’s money content material spending?
Theodore A. Sarandos — Co-Chief Govt Officer
Thanks lots, and thanks, Dan. Let me begin by saying it is a actually troublesome time for lots of people in Southern California. So, many individuals in our trade, together with our workers, have been deeply impacted by these fires. And the hardest-hit areas of those fires, the areas round Pacific Palisades, Altadena, Malibu, are very closely populated with the oldsters above and beneath the road who we work with each single day.
So, we’re doing every little thing we will to assist with reduction, and we’re getting these people who can again to work. To your query immediately, no significant delays within the supply of the initiatives and no significant influence to the money in 2025, however very significant disruption in folks’s lives. So, our purpose is to maintain every little thing on schedule safely, be aware of parents who want time to work via the challenges of the fires, together with, in some instances, lack of life and residential. However this trade has been via a extremely powerful couple of years, beginning with COVID, going into the strikes, and now this.
So, it is actually essential that we attempt to not delay something and attempt to make it possible for these jobs keep secure. However I undoubtedly wish to add that we’re extraordinarily grateful to the firefighters and first responders who’re nonetheless preventing flames proper now. These are the actual heroes right here. However, Dan, to your direct query, no influence in 2025 on money or deliverable, nothing significant.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Thanks, Ted. We’ll take our subsequent query from Jason Helfstein of Oppenheimer. Is it truthful to imagine that many of the upside within the 19 million subscriber additions got here from the “Jake Paul” and the Christmas Day soccer video games? And the way was the attrition or retention, I assume, publish the Christmas Day video games versus regular post-holiday ranges?
Gregory Ok. Peters — Co-Chief Govt Officer
Yeah, brief reply to that query is not any. At a excessive stage, we have seen broad power throughout content material classes, throughout all areas. We have seen it all through your entire yr. And as we have persistently seen throughout our historical past, no single title actually drives a majority of our acquisition or engagement.
So, even in a tremendous quarter the place we had three large stay occasions, we had an unbelievable struggle, two NFL video games; we had certainly one of our greatest TV sequence ever in “Squid Recreation” season 2; all very profitable occasions and titles that we’re thrilled about, our estimates for subscriber advertisements pushed by these titles mixed characterize a small minority of our complete member acquisition within the quarter. So, it is actually the entire service that is working that delivered the upside that we noticed this quarter. The overwhelming majority of our web advertisements have been pushed by a broad slate and our portfolio globally. And, Ted, perhaps you wish to choose it up for the final half of that?
Theodore A. Sarandos — Co-Chief Govt Officer
Yeah, simply placing some coloration round that, , we actually have constructed the enterprise on selection and high quality throughout nations, throughout areas, throughout genres. And we actually targeted that year-round of getting a really sturdy slate of programming for our members. So, we’re thrilled that some people got here in for the struggle and a few people got here in for the video games, however they caught round for “Squid Recreation” and for “Carry-On” and for “Black Doves” and for “The Six Triple Eight” and “Senna” and Nate Bargatze’s new comedy particular. All these issues all carried out rather well within the quarter and proceed to within the days and weeks after the struggle and after the video games.
And what’s actually been most encouraging is that the retention habits of these people who did are available in for these occasions look lots like the oldsters who are available in for all of our different large titles. And so, I simply would add that it is nice that every one these large swings labored very effectively within the quarter. However to have the ability to have that translate into income progress meaningfully, every little thing needs to be working. The product, the pricing groups, the advertising, the promoting, all these issues have gotten to be working effectively.
And we noticed actually sturdy execution throughout the board all through the quarter and all year long.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Thanks, Ted and Greg. Our subsequent query is from Steven Cahall from Wells Fargo. And, Spence, that is most likely finest dealt with by you. The U.S.
greenback has strengthened since your final outcomes, and also you mentioned that you will are likely to underperform your margin targets when the greenback is stronger. What FX volatility do you assume you may efficiently hedge out in 2025? And what are the very best methods to estimate the influence of forex actions, web of hedging?
Spencer Adam Neumann — Chief Monetary Officer
Certain, Spencer, I’ll take that one. So, roughly 60% of our income is in non-U.S. greenback currencies. And consider it as the best way we take a look at it’s of that quantity, we attempt to hedge roughly 50% on a rolling ahead 12-month foundation.
So, , I wish to stress that we view hedging as kind of a short- to medium-term resolution at finest. Our focus has all the time been to handle the underlying working outcomes of the corporate via pure hedges the place we will, plus pricing and value construction over time. So, our hedge program is admittedly only a value averaging program to easy the influence of FX, scale back the volatility from large near-term FX strikes, and keep away from short-term swings to the enterprise in order that we will make investments appropriately for each the brief and the long run.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Thanks, Spence. The subsequent query comes from Brian Pitz of BMO Capital. The promoting consumer base is rising shortly, and your advert tech has been ramping for nearly a yr. What are your greatest learnings and, maybe, hurdles for promoting monetization in 2025?
Gregory Ok. Peters — Co-Chief Govt Officer
In the beginning, we love our advertisements plan as a result of it permits us to supply a lower cost level for customers. That is extra alternative, good accessibility that’s proving to be common. And it signifies that we clearly have extra folks that may enroll and benefit from the rising vary of leisure we have got to supply. It is also the explanation that we have been profitable in driving that first advertisements precedence we had in our advertisements objectives, our most major advertisements objectives, which have been to get to ample scale.
So, This autumn advertisements plan represented over 55% of signups throughout our advertisements nations. We have seen membership on these advertisements plan improve about 30% quarter over quarter. It is final quarter that was on high of 35%; the quarter earlier than, on high of serious progress the quarter earlier than that. So, as you level out, we have seen vital progress since launch, which we’re enthusiastic about.
Perhaps much more enthusiastic about the truth that the engagement of these advertisements members stays wholesome. So, view hours per member on the advertisements plan is just like engagement on our commonplace nonads plan in our advertisements nation, which is a extremely good marker that we’re enthusiastic about. So, we have carried out the work, I’d say, to satisfy our scale objectives for advertisers in ’25. And that signifies that more and more we have been in a position to shift extra of our focus, extra of our consideration, on making the providing higher for advertisers to extend monetization of that rising stock.
That is going to stay a precedence and a part of our roadmap for no less than the subsequent a number of years, seemingly years to come back after that. However we’re making strong progress already. For instance, we exceeded our advertisements income goal in This autumn, which was an thrilling milestone to get. We have doubled our advertisements income yr over yr final yr.
We count on to double it once more this yr, so that ought to offer you a way of the slope of monetization progress that we’re on. And broadly, we consider this as we’re making strong progress. There’s appreciable work forward of us for positive. However we do not see particular hurdles that you just talked about within the query different than simply doing the work.
So, we predict our path is comparatively simple, and we’re assured we have got a major runway to proceed to develop that income.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Nice. And we’ve got a follow-up query on promoting from Jessica Reif Ehrlich of Financial institution of America. On promoting, do you’ve gotten all of the tech and instruments it’s worthwhile to considerably scale up and transfer from the crawl to stroll part?
Gregory Ok. Peters — Co-Chief Govt Officer
I believe you may say that 2025 is the yr that we transitioned from crawl to stroll. An enormous a part of that’s standing up our personal advert stack. We launched that in Canada, and that is gone effectively. We’re testing, we’re studying shortly as we put together to then roll that out in 2025 throughout the remainder of our 12 advertisements nations, beginning with the U.S.
in April. And the largest preliminary profit we’ve got of utilizing our personal advert server is simply enabling us to supply extra flexibility, extra methods of shopping for for advertisers, fewer activation hurdles, simply enhancing the general purchaser expertise. And naturally, that’s meant to drive elevated gross sales and the convenience of transacting with Netflix. And we’re already seeing the influence of these advantages within the income progress in Canada.
So, that is thrilling and, , improves our optimism round it. After which, over time, the first-party advert tech platform permits us to ship extra vital capabilities to advertisers that we hear from them that they actually need. So, extra programmatic availability, we’re speaking enhanced focusing on. We’re leveraging extra information sources, extra measurement, extra reporting, extra incrementality research.
So, being on our personal tech stack allows all these promoting options, advertiser-facing options. However the different large profit is that it simply creates a higher-quality expertise for our members. So, it will increase relevance. That is good for them, it is good for advertisers, it is good for us, it is good for everyone within the ecosystem, basically.
Simply so, , to reiterate, we have got a few years of constructing forward of us. The roadmap is obvious. We’re dedicated to iterative innovation and promoting, simply as you’ve got seen us do in lots of different locations. And as I discussed earlier than, whereas we have got tons of labor, we really feel the trail for the subsequent a number of years no less than is pretty simple, and we’re assured we will proceed to develop income at a strong tempo and earn a rising piece of that over 25 billion in CTV advert spend.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Superior. Thanks, Greg. I will now shift to a few content-related questions from analysts. The primary is from Ben Swinburne of Morgan Stanley.
He requested, “Ted, do the sturdy viewing numbers for the NFL video games depart you extra excited by full-season sports activities rights for Netflix? Or do you continue to see full-season sports activities rights as usually unattractive for Netflix?
Theodore A. Sarandos — Co-Chief Govt Officer
Effectively, let me begin with the viewing of the NFL video games, which, , for — there are in-season video games, and they’re the 2 most-streamed NFL video games ever. The typical minute viewers for these video games have been 30 million and 31 million. It is phenomenal. And Beyonce additionally set a really excessive bar for future halftime reveals, even for the Tremendous Bowls.
So, we’re actually thrilled with the viewing, we’re thrilled with every little thing about it. All that being mentioned, we’re continually making an attempt to broaden our programming. And stay occasions is a type of issues, and sports activities is a part of these stay occasions. So, once I take a look at this and say that is a extremely incredible factor, nevertheless it does not actually change the underlying economics of full-season big-league sports activities being extraordinarily difficult.
So, if there was a path the place we may really make the economics work for each us and the league, we actually would discover. However proper now, we consider that the stay occasions enterprise is the place we actually wish to be. And sports activities is a vital a part of that, nevertheless it is part of that enlargement.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Thanks Ted and Wealthy Greenfield from LightShed has an identical follow-up query. Has the struggle and “WWE Uncooked” outcomes influenced your resolution course of on further rights just like the UFC?
Theodore A. Sarandos — Co-Chief Govt Officer
Yeah, effectively, look, not going to remark something particularly just like the UFC, however WWE is off to an excellent begin. Our first week, we drew about 5 million views, which is about two instances the viewers that “Monday Night time Uncooked” was getting in linear tv, fairly per how we modeled it, how we would hope to construct the viewers for the league. We additionally noticed that the nonlive viewing, so within the day after the stay occasion, our viewing grew by 25%, principally outdoors of the U.S. time zones.
So, it is a new viewing in U.Ok., in Canada, Mexico, Australia, Brazil, significantly large markets. So, we’re actually thrilled to see how that is going to date. Within the U.S., our viewing of “Monday Night time Uncooked” was as large because the “Monday Night time Uncooked” viewing has been in 5 years, so we’re tremendous thrilled with how that is going and the way that is popping out. Once more, simply, , to not be overly repetitive, however we will be aware of the underside line.
And it is actually essential that these economics do work and that the big-league sports activities full-season economics are very onerous to make work. And so, for us, we would like to have the ability to deliver worth to the game like we’ve got up to now with WWE, actually, however like we’ve got with the NFL, too, the place we have been principally in a position to deliver an enormous viewers, a younger viewers, a extra world viewers than linear tv. However that needs to be mirrored within the deal as effectively.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Thanks, Ted. And that is an excellent segue to our final query on sports activities to spherical it out from Vikram of Baird. Might you elaborate on the choice to amass rights to the FIFA Girls’s World Cup in 2027, 2031? What have been the options of the occasion that made it engaging? And the way does this match into your broader technique for stay sports activities?
Theodore A. Sarandos — Co-Chief Govt Officer
I believe it suits completely into the technique. Girls’s World Cup is an actual TV occasion, completely per what we’re making an attempt to do right here. These matches set a bunch of viewing information in 2023, and girls’s sports activities have solely change into extra attention-grabbing and extra common since. It is a month-long occasion stuffed with drama performed by among the best athletes on the planet.
We’re thrilled to be the house for these video games in — beginning in 2027. And we’re thrilled to have the time to start out telling the tales of those groups and these athletes like we have carried out so effectively with different sports activities with our sequence and our documentaries.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Nice. One other query from Wealthy Greenfield of LightShed Companions. Did “Carry-On” show that films can break via with no theatrical launch? In lower than two months, “Carry-On” was well-reviewed and has racked up 313 million view hours, and the movie generated vital buzz throughout social media and is ready to surpass “Hen Field” viewership. Was there an unusually excessive stage of promoting spin for this movie, or did the thrill construct organically on Netflix?
Theodore A. Sarandos — Co-Chief Govt Officer
This was an excellent instance, I believe, of a film born on Netflix that may generate an infinite viewers and tons of buzz. The film — in actual fact, one of many producers known as me over the break to inform me that “That is precisely what it seems like when I’ve an enormous film within the theaters,” which was an excellent factor to listen to. And we even obtained injected into the controversy the age-old “Is ‘Die Arduous’ a Christmas film,” debate, and “Is ‘Carry-On’ the brand new ‘Die Arduous,’ which is we’re undoubtedly within the zeitgeist, within the tradition drawing an enormous viewers for a film that premiered on Netflix and had a really modest advertising spend like we sometimes do. And I believe it really attracts loads of consideration to the — how highly effective the platform is to advertise to our personal members, how Netflix can discuss to our members the place they’re, which is on Netflix, to inform them about an excellent new film they’ll love.
And the — after which we’ve got our social channels with over a billion subscribers that really hold that dialog going. So, I believe it is a actually sturdy proof level {that a} film born on Netflix generally is a large hit and be the middle of tradition as effectively.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Thanks, Ted. And for the document, I do assume each “Die Arduous” and “Carry-On” are Christmas films.
Theodore A. Sarandos — Co-Chief Govt Officer
To be continued, to be continued.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
And I believe that is an excellent segue to Doug Anmuth’s query from JPMorgan. Ted, does the settlement to debut “Narnia” within the theater in 2026 recommend any shift in your total theatrical technique?
Theodore A. Sarandos — Co-Chief Govt Officer
No change in any respect to our theatrical technique. Our core technique is to offer our members unique first-run films on Netflix. The “Narnia” IMAX launch is a launch tactic. We routinely launch films in theaters earlier than — a few weeks earlier than to qualify for awards, to satisfy pageant necessities, and to prime the publicity pump a bit.
Within the case of “Narnia,” it is a two-week particular occasion. I believe it’s totally differentiated from different runs as a result of I doubt anybody has a display screen as large as an IMAX display screen at dwelling, so it’s form of a differentiated client expertise. However we have carried out variants of those releases many instances, and doing it with IMAX form of tremendously simplifies our launch course of as effectively. However principally, I wish to say, I am extremely excited to be working with Greta on this film.
We’re tremendous excited to get it into manufacturing. So, we will speak about how nice this film is extra so than which screens it is on. She’s an unbelievable director, and it is a actually thrilling undertaking.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Nice. Our subsequent query comes from Vikram from Baird, and it is about plans and pricing. How do you intend to strategy the cadence and magnitude of value will increase going ahead, significantly in your largest markets? What are the indicators that inform these selections throughout the totally different areas and plans?
Gregory Ok. Peters — Co-Chief Govt Officer
I may take this one. Our pricing philosophy hasn’t modified. It is just about the identical as we have talked about for the final a number of years. After all, we glance to repeatedly present extra worth to our members, looking for to properly make investments to extend the range and high quality of our leisure providing.
After which, we take heed to these members. We pay attention for indicators like engagement, retention, acquisition. There’s extra secondary indicators as effectively, all to inform us once we’ve achieved that improve in worth. And once we’ve carried out that, then we ask them to pay a bit extra to maintain that virtuous cycle going.
You have seen us take a value throughout a lot of markets in EMEA and APAC and LatAm over the past couple quarters throughout most plans and together with advertisements, too. And people modifications have gone easily. You possibly can see these in our outcomes. We actually count on the identical for these newest modifications.
And I believe it is, , price noting and reiterating that we consider that our beginning value, $7.99 within the U.S., [Inaudible] Canadian in Canada, for normal with advertisements is an unbelievable leisure worth. And it is a extremely accessible entry level. So, finally we really feel actually good about our long-term monetization alternative. We earn, proper now, solely 6% of the income alternative within the nations and segments that we at present serve.
And so long as we proceed to ship on enhancing the range, the standard of our TV and movie slate, we regularly develop the providing with newer content material varieties, we consider we’ll be capable to improve that share progressively yearly.
Theodore A. Sarandos — Co-Chief Govt Officer
If I may simply chime in on you, Greg, I simply — , when you are going to ask for a value improve, you higher be sure to have the products and the engagement to again it up. And I really feel like what we’ve got going into 2025 is simply that. We’ve got the returning seasons of our greatest reveals ever, “Wednesday,” “Stranger Issues,” and “Squid Recreation,” “Night time Agent,” Ryan Murphy’s “Monster,” “You,” “Alice in Borderland” from Japan, “Delhi Crime” from India, new seasons for “Drive to Survive.” And on the movie aspect, we have got new films from Oscar winners like Guillermo del Toro, Kathryn Bigelow, Noah Baumbach, the Russo Brother’s new movie, “Blissful Gilmore 2,” a brand new “Knives Out” movie. And stay, clearly, we have got the SAG Awards subsequent month, Christmas Day soccer, “Monday Night time Uncooked” each Monday evening, and some surprises there, too.
So, I undoubtedly really feel just like the power of slate has by no means been higher.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Nice. I will now flip to a couple questions on engagement. So, our first one comes from Peter Supino of Wolfe Analysis. Engagement is secure based mostly on information from third-party panels.
Is engagement progress a strategic precedence for Netflix?
Theodore A. Sarandos — Co-Chief Govt Officer
Completely. And I believe we take a look at this and say what we’re making an attempt to do is, , entertain the world. And also you measure that on how are folks pushing play and sticking round for the issues that they love. And Bella and her staff are actually form of programming into these moments of breadth of high quality and making an attempt to satisfy folks the place they’re, discovering the — one thing for everyone and one thing for each temper and each language and each a part of the world.
It is a — it is powerful work and that — that they’ve lower out for them. However they’re doing the job of profitable over these moments each evening and getting individuals who spend, proper now, at about 200 billion of hours of programming — of streaming final yr. Our common member is looking forward to about two hours a day. So, we have nonetheless obtained loads of work to do to develop that, and that is what the staff may be very extremely targeted on.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Yeah —
Gregory Ok. Peters — Co-Chief Govt Officer
Not simply —
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Go forward, Greg.
Gregory Ok. Peters — Co-Chief Govt Officer
Sorry, I — so not surprisingly, I’d say, we persistently see that, , engagement — enhancements in engagement are correlated with the opposite key enterprise drivers that we’ve got. So, it clearly drives retention, acquisition, and so forth. And so, we’re excited that we have seen, , persevering with progress and engagement and stay up for extra of that. Spence?
Spencer Adam Neumann — Chief Monetary Officer
Effectively, you hit it. It is — it began — we talked about it lots. The flywheel begins with engagement. It is engagement, income, revenue, and it drives the flywheel.
And the remainder of the numbers are factors you hit on, I believe, apart from perhaps one different is simply to form of be aware that as a reminder, within the letter, we talked about the truth that we’ll now going ahead twice a yr on the identical day as earnings launch our engagement studies beginning with our Q2. So, in July, our earnings report may also embrace our engagement report simply to emphasise that form of a gradual drum beat with earnings and with our efficiency.
Theodore A. Sarandos — Co-Chief Govt Officer
And to get — and to get a bit extra granular even sooner, our subsequent engagement report goes to publish in February. So, it is subsequent month.
Spencer Adam Neumann — Chief Monetary Officer
Yup. Good level.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Nice. After which, our second query on engagement is a bit bit broader. It is from Justin Patterson of Keybanc. What are the important thing steps to competing extra with short-form video platforms for engagement?
Theodore A. Sarandos — Co-Chief Govt Officer
Our purpose right here is to entertain all audiences, together with youthful audiences who perhaps watching disproportionately extra short-form content material. Now, the wonder is that these people all love movie and TV reveals as effectively. So, we’re continually entertaining them with initiatives that get them so excited that they push play, they stick round, they go on their social media accounts and discuss concerning the reveals, they do tributes to the reveals. You see what number of — whenever you see the brand new season, when “Wednesday” comes out, you are going to see all of the social media platforms get flooded with, , tributes to this work.
Our core is in form of skilled longer-form storytelling, and that is a really large and enduring enterprise. However, once more, as issues get pulled — as eyeballs get pulled into different locations, we undoubtedly wish to be there for them as effectively. I do discover that the short-form companies are also an excellent breeding floor for brand spanking new storytellers. So, you see, we’re tremendous excited to deliver Ms.
Rachel over onto Netflix. Mother and father are enthusiastic about that, too. However we additionally have gotten a wealthy historical past of discovering initiatives in different places and having them up the sport and be very profitable on Netflix, issues like “Cobra Kai” and “CoComelon” and “Someone Feed Phil,” which is now capturing its eighth season. So, I really feel like these — the work we’ve got to do there’s to win over audiences with programming that they love.
You realize, with “Heartstopper” or “Stranger Issues” or “Ginny & Georgia,” “Elite,” “Outer Banks,” that is what we’ve got to do. We’ve got to out-compete for these moments of leisure reality.
Gregory Ok. Peters — Co-Chief Govt Officer
I believe per that and simply increasing on it, I believe we see ourselves as taking part in a selected and differentiated position within the ecosystem. So, whether or not it is being a spot the place these nice storytellers that Ted talked about can graduate to, , from — whether or not it is from locations like YouTube or, , the theater or another place that they arrive from, , we all know that buyers desire a spot to take pleasure in nice films and TV reveals, to have a consumer interface and consumer expertise which is designed particularly round that. We all know that our inventive companions want somebody that may take part in investing in these to share the danger that is inherent in bringing these tales to life. So, we, , wish to double down on supporting that a part of the ecosystem.
And, , we wish to make it possible for reveals like “Stranger Issues” or “Wednesday” or “Heartstopper,” “Outer Banks,” which, , have large viewing and fandom, particularly with these youthful audiences, proceed to have a spot to be discovered, cherished, and loved.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Nice. Thanks. Our subsequent query comes from Alan Gould of Loop Capital. How do you assess your progress within the online game house? How have the engagement tendencies been? When do you anticipate video video games will have an effect on subscriber progress or retention?
Gregory Ok. Peters — Co-Chief Govt Officer
OK, so lots there. I might say we have discovered fairly a bit and made some good early progress since we have launched video games. We have, after all, launched a bunch of video games. With some highlights amongst them, the critically claimed Oxenfree II stands out; actually, Grand Theft Auto, the place we drove tens of tens of millions of downloads.
We have got fan favorites based mostly on Netflix IP, issues like “Too Sizzling to Deal with,” “Emily in Paris,” “Promoting Sundown.” And to our newest large launch, Squid Recreation: Unleashed, which we actually assume validates our Netflix recreation method, which is enabling this virtuous cycle between linear content material and simultaneous recreation choices. And we’re simply scratching the floor at present by way of what we will finally do in that house. However we already see how this strategy not solely extends the viewers’s engagement with the universe and the story, but in addition creates a synergy that reinforces each mediums, the interactive and the noninteractive aspect. So, based mostly on all of these learnings and beneath the management of Alain Tascan, we proceed to refine our technique.
And we will be specializing in extra narrative video games based mostly on Netflix IP. These are constant fan favorites, and we have got lots within the library to work with there. We’ll even be introducing occasion and sofa co-op video games on the TV delivered from the cloud. We consider this as a successor to household board recreation evening or an evolution of what the sport present on TV was once.
So, we’re enthusiastic about delivering some cool experiences in that house. We’ll ship video games for youths. That is no advertisements, no in-app funds. It is a secure house for youths, simply included together with your subscription.
And, after all, we wanna do extra recognizable mainstream titles, whether or not that’s licensed titles like GTA, and we will have extra of these large licensed titles to come back that we’re trying ahead to, in addition to homegrown titles based mostly on our IP, like Squid Recreation: Unleashed, which I will simply reiterate, , Squid Recreation: Unleashed reached No. 1 in motion video games within the app shops in 107 nations. It is on tempo to change into our most downloaded recreation. And so, to your query about impacts on the subscriber aspect, we already see optimistic impacts in acquisition and retention from our game-playing members.
Now, these results are comparatively small at present, however frankly, so is our funding in video games relative to our total content material price range. And we will keep disciplined about scaling that funding as we see continued scaling in member advantages. So, to attempt to summarize, there’s loads extra to do on this house, however we’re breaking into a complete new content material class, which, by the best way, drives, , roughly 140 billion in client spend, ex China, ex Russia, and never even together with the advert income. So, we’re iteratively exhibiting our members that we’re a spot to find and play video games, and we stay up for persevering with to launch larger and larger video games yearly.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Thanks, Greg. We’ve got a few late-breaking questions on the forecast that analysts have submitted, so I will wrap up with two of these questions. This comes from Jason Helfstein of Oppenheimer. You spent roughly $17 billion on money content material spending in 2024 and can spend about $18 billion in 2025.
How ought to buyers take into consideration long-term spending ranges? Is there some extent the place you attain an equilibrium the place you needn’t improve spend past inflation?
Spencer Adam Neumann — Chief Monetary Officer
Need me — need me to take that?
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Certain.
Spencer Adam Neumann — Chief Monetary Officer
Certain, I will take that one. I believe we’re a great distance from equilibrium. As you say, we’re taking over our money content material spend this yr, estimated from 17 billion to 18 billion. That is within the context of we’re small by way of view share and penetration all over the place around the globe.
We’re lower than 50% penetrated into related households. You heard from Greg that we’re solely capturing about 6% of our estimated income market, so we’ve got a protracted option to develop. It is actually about the place will we put the subsequent billion {dollars} after which past that to work in probably the most impactful means. Over the subsequent yr or so, you will see that in areas like persevering with to construct into big-scripted TV sequence.
As you heard from Ted, we’re persevering with to construct out stay, we’re persevering with to construct out our unique programming in every of our areas around the globe and likewise seeing increasingly more form of impactful licensing alternatives. And I believe we form of develop from there. So, the chance, there is a lengthy runway to proceed to develop. We do it in a disciplined means, proper? So, we form of set our progress based mostly on our top-line progress and our margin targets, after which we form of allocate as we will throughout the enterprise for highest influence.
And I believe you’ve got seen us try this in a accountable means, the place, , our money spend and our content material money amortization is kind of a 1.1 ratio roughly, plus or minus, between our content material amort, which runs via the P&L and the money spend, which runs via cashflow. And each are rising slower than our income progress. So, I believe it’s best to see us persevering with to develop in that means for the foreseeable future as we proceed to develop increasingly more engagement and please increasingly more, hopefully, rising viewers around the globe.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Thanks, Spence. And our final query comes from John Blackledge of TD Cowen. Are you able to please discuss concerning the drivers of elevating your 2025 working margin steering? What are the largest factors of leverage driving larger margins this yr? Spence, do you wish to take that?
Spencer Adam Neumann — Chief Monetary Officer
Yeah, positive. So, , we’re all the time form of trying to steadiness our income progress with strategic funding into the enterprise. And we predict we have balanced that effectively this yr. You see, we guided to 12% to 14% high line income progress.
In the event you form of do the read-through by way of — based mostly on our margin steering, what we’d count on by way of our implied expense progress, you may see it is kind of excessive single-digit, , 9%, plus or minus, expense progress anticipated for 2025. And should you break that down, we’re anticipating kind of excessive single-digit, roughly, content material amortization progress. So, nonetheless beneath income progress so some margin there. And that is based mostly on, once more, that 18 billion of, plus or minus, anticipated content material money spend.
And the amort strikes round a bit based mostly on the timing of titles and releases, however excessive single digit is a fairly good estimate. After which, we’re investing into our progress priorities. We’re fairly closely investing into our product and engineering groups to construct out advertisements and stay and video games capabilities and likewise our new consumer interface to boost our product discovery. We’re additionally investing within the advertising and gross sales line, totally on the gross sales aspect, as we construct out our advert gross sales group and go-to-market capabilities.
And past that, our assist areas are form of, , rising kind of mid, low single digits. So, throughout the board, for probably the most half, we’re driving a margin enchancment in a means that we predict is suitable for the enterprise whereas investing into our progress.
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Nice. Thanks, Spence. And thanks all for becoming a member of us for our This autumn earnings name, and we stay up for talking with you all subsequent quarter. Thanks very a lot.
Length: 0 minutes
Name members:
Spencer Wang — Vice President, Finance, Investor Relations, and Company Growth
Theodore A. Sarandos — Co-Chief Govt Officer
Gregory Ok. Peters — Co-Chief Govt Officer
Ted Sarandos — Co-Chief Govt Officer
Spencer Adam Neumann — Chief Monetary Officer
Greg Peters — Co-Chief Govt Officer
Spence Neumann — Chief Monetary Officer
