Netflix can build on blockbuster earnings with help of Stranger Things, Squid Games and Wednesday: Dan Coatsworth

With more people signing up to use its services, the business is looking financially strong and strategic growth plans are yielding great success. It’s not a surprise that Netflix feels comfortable in raising prices. Customers love its content so strike while the iron is hot and get them to pay more.

A monthly subscription to Netflix is still an affordable treat and no more than a round of coffees for a group of four or a few beers after work.

There is good reason to put up prices. Its cash spending on content is set to hit $18 billion in 2025 versus $17 billion last year. The extra money needs to come from somewhere. Netflix has bold plans for how it intends to spend the cash and both viewers and shareholders could benefit.

Netflix has been spreading its wings to offer more diversified content. Sports and games now comfortably sit alongside films and TV shows, making Netflix a broader entertainment hub. It means there is something for everyone and the company clearly feels this is worth a higher monthly subscription price.

Sports rights can be incredibly expensive and it makes sense that Netflix has opted to go with special events rather than full season sport packages. There is often a buzz around special events which should help to drive up audience numbers, particularly if everyone is talking about a certain game at work or among friends. It’s a clever move as it means Netflix can be selective with the games for which it wants to obtain the rights, thereby keeping greater control over spending.

Recent boxing and NFL events proved to be a big win for Netflix, entertaining viewers and offering something else in its sales pitch to keep enticing more people to subscribe. Such sporting events are also perfect for attracting advertisers keen to reach a large audience, and this is now a key source of income for the company.

Nearly all of the main streaming platforms now offer cheaper advertising-led subscription tiers. Consumers can watch content at a lower price point in exchange for being served adverts before and during programmes. These interruptions have become second nature and aren’t a massive turn-off.

Netflix is determined to make advertising a much greater proportion of its overall income and has developed technology to better measure audiences and give advertisers the precise information they desire to support targeted promotions. The company beat its fourth quarter advertising revenue target and said it had doubled its advertising revenue year-on-year in 2024. It expects to double it again this year, which is a punchy target but a major win if achieved.

It’s going large on scripted TV series in 2025. A multi-part series could be 10 hours of content or more, which keeps viewers coming back to the platform and also feels like they are getting value for money.

Already on the slate is the final series of Stranger Things; another round of Wednesday and her spooky antics; and the second series of Squid Game should be a massive driver of subscriber sign-ups in the first quarter as it was only released a few days before the end of the previous quarter.

Gaming is perhaps the weak spot for Netflix. It’s been quietly trying to develop a compelling gaming proposition to sit alongside film and TV, but it feels like the service is still finding its feet. The focus for gaming is now on milking Netflix’s existing intellectual property, implying we’ll see lots of games featuring characters from its popular shows and movies.

Dan Coatsworth is an investment analyst for AJ Bell