Can Europe Continue to Fuel Netflix's Global Growth? An Interview with Fable Data
Exploring Netflix’s growth trends in Europe, we interview Fable Data’s Research Director, Avinash Srinivasan.
Welcome to the Data Score newsletter, composed by DataChorus LLC. The newsletter is your go-to source for insights into the world of data-driven decision-making. Whether you're an insight seeker, a unique data company, a software-as-a-service provider, or an investor, this newsletter is for you. I'm Jason DeRise, a seasoned expert in the field of data-driven insights. As one of the first 10 members of UBS Evidence Lab, I was at the forefront of pioneering new ways to generate actionable insights from alternative data. Before that, I successfully built a sell-side equity research franchise based on proprietary data and non-consensus insights. After moving on from UBS Evidence Lab, I’ve remained active in the intersection of data, technology, and financial insights. Through my extensive experience as a purchaser and creator of data, I have gained a unique perspective, which I am sharing through the newsletter.
This edition of the Data Score Newsletter continues our Q&A series, offering a deep dive into the compelling insights that data analytics firms provide, showcasing the impactful narratives data can unfold. This and future data provider interviews won’t be paid placements (it is made clear when the text is a sponsored ad) nor does the article act as an endorsement of one data vendor over another. Also, this is not investment research.
Interview Focus: Does Fable Data show Netflix has continued its momentum in Europe in 1Q24?
Netflix is one of the most widely followed companies across financial markets. Investors and competitors in the media industry will be watching on April 18th when Netflix reports its 1Q24 results. Of interest in the prior quarterly results, EMEA (Europe, the Middle East, and Africa) was an area of noted strength. Here’s an excerpt from the transcript:
Spencer Wang — VP of finance, IR, and corporate development: The next question is from Doug Anmuth from J.P. Morgan, and I'll direct this one to Spence: The 13 million-plus paid net ads in Q4 was strong overall across all regions, but EMEA seemed to drive particular upside. Is there anything specific to point out there, perhaps the ad tier specific content, or localized pricing, perhaps?
Spence Neumann — Chief Financial Officer: Yeah, so thanks. Well, actually, EMEA is a sort of a perfect example of a little bit of what Greg was just talking about. So, first, it starts with great slate performance or great content performance. We had a really strong slate across EMEA from The Crown finale in the U.K. to -- in France, we had Blood Coast and Lupin and Class Act. We had Berlin, Elite, and Nowhere in Spain; and in Poland, 1670; and much more, frankly. So, it starts with that strong slate. And then, if I channel Greg's last answer, that kind of better value translation engine, if you will, which drives even more growth through our paid-sharing solutions and our monetization engine. So, that helped as well. So, it really all came together in EMEA this past quarter. And I'll say, very importantly, it's not just net ads, it's, you know -- again, our -- our primary focus is on revenue growth. We had very strong revenue growth as a result of that in EMEA this past quarter, 13% FX-neutral growth in Q4.
So, we connected with Avinash Srinivasan of Fable Data to learn more about what their data shows for recent trends in Europe.
The Data Score: Did Netflix continue the trend seen in 4Q 23 across Europe in 1Q 24?
Avinash Srinivasan of Fable Data: A combination of strong content releases, a password sharing crackdown and the introduction of lower-priced plan alternatives has allowed Netflix to see impressive subscriber growth in the EMEA region through the second half of 2023, with Fable Data highlighting a continuation in the early parts of 2024. Recent trends suggest subscribers remain engaged and unwilling to turn off their subscriptions.
A key contributor to this has been the fast uptake of basic-with-ad plans, first introduced in late 2022, but this has also resulted in a decline in average revenue per membership in the back half of 2023. Fable Data highlights that this trend is continuing in the early parts of 2024, with an increasing share of basic-with-ad plans and lower average revenue per user being seen in Q124.
Fable Data indicates basic ad plans have shown strong take-up, representing between 12% and 27% of subscribers across key EU territories and having doubled in the last 6 months (6%–12% of total subscribers in Aug 2023).
Premium plan preference is clearly waning across all regions as a result, likely accelerated by increasing cost of living pressures and a crackdown on password sharing.
Subsequently, strong take-up of basic ad plans is resulting in a steep decline in avg price per month of between 1-2 €/month, particularly in Germany, Italy, and Spain, where take-up has been strongest.
Netflix is using price rises as an offset, with recent evidence (October 2023) in the UK and France indicating a stable average price outcome is possible only with substantial price rises.
Crackdowns on password sharing and the introduction of an ad tier over the last 12–18 months have seen subscriber growth accelerate again. We are seeing elements of consumers trading down to lower price points, but this is not a primary driver as Netflix is still seeing net new subscriber growth.
The Data Score: Are there pockets of higher churn to watch? If so which geographies and which services are they switching to?
Avinash Srinivasan: We are not seeing any discernible levels of churn across key EU markets—in fact, the opposite. Although not necessarily as strong as the prior quarter, Q4, we are continuing to see net subscriber growth.
The Data Score: How do the European trends for Netflix compare to those of Disney+ in your data?
Avinash Srinivasan: Netflix and Disney have both gone hard on price rises in the UK late last year and early this year, as Disney has adopted the same pricing strategy as Netflix (multiple tiers with ads).
What’s interesting here is the price rise in November:
The take-up of the ad plan is strong at 5% of consumers in the first 4 months. For reference, the UK was at 2-3% for NFLX in the first few months.
Consumers are automatically shifted to the more expensive premium tier, which seems to be sticking, according to the data. This is a net positive for average pricing, despite the promotional £1.99 plans (light blue) being offered.
The Data Score: Can you share a bit more about Fable’s data sourcing and analytics methodology?
Avinash Srinivasan: Fable Data has built a privacy-centered Data as a Service (DaaS) platform to responsibly acquire and ethically productize data through exclusive partnerships with financial institutions. Partnerships include European banks, credit card issuers, and payment processors. The partners run Fable’s masking and redaction software, removing personal and sensitive data. Fable then harmonizes, cleans, enriches, and productizes the data.
Concluding thoughts
Thanks again to Avinash and the Fable Data team for sharing their time, effort, and data to check in on Netflix trends in Europe. If you’d like to learn more, you can reach out to Avinash by email at avinash@fabledata.com or find more information at https://www.fabledata.com/.
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- Jason DeRise, CFA
