Behind the Numbers: How Recession-Proof is Netflix?

Podcast Information:

• Title: Behind the Numbers: An eMarketer Podcast
• Host: Marcus
• Guests: Ross Benish (Senior Analyst, Advertising and Media), Paul Werner (VP of Content)
• Release Date: May 2, 2025

Introduction

In the May 2, 2025 episode of Behind the Numbers, hosted by Marcus, the discussion centers on the resilience of Netflix in the face of economic downturns. With insights from industry experts Ross Benish and Paul Werner, the episode delves into Netflix's subscription strategies, potential for growth, content diversification through podcasts, and the integration of AI to enhance user experience.

1. Assessing Netflix's Recession Resilience

Ross Benish rates Netflix's recession-proof capabilities at an 8 out of 10. He highlights that while Netflix primarily relies on subscriptions rather than ad revenue, prolonged or severe recessions could lead to account cancellations or downgrades. However, the ongoing trend of consumers staying home and reducing expenditures on external entertainment fortifies Netflix's position. Ross notes:

"If a recession got prolonged or was quite severe, people may cancel their accounts or downgrade their tiers. But for now, I believe most people will continue subscribing Netflix."
(03:45)

Paul Werner offers a slightly more cautious assessment, rating it a 7 out of 10. He acknowledges Netflix's subscription model's robustness but points out potential challenges such as price increases and market saturation. Paul remarks:

"I don't think that [reaching 9 out of 10]... people might be more selective about when they subscribe to Netflix, so there might be some more churn that way."
(04:54)

Despite differing ratings, both analysts agree on Netflix's relative stability compared to other tech and media giants, citing its strong subscription base and lower dependence on fluctuating ad revenues.

2. Subscriber Growth Projections and Challenges

Marcus brings up Netflix's ambitious goal to increase subscribers from 300 million to 400 million by 2030. This aggressive target is met with Paul advocating optimism based on international expansion opportunities, particularly in Asia-Pacific regions like India and Brazil. He states:

"A lot of it is going to come down to whether they can license more sports content. That's going to drive wholesale increases in subscribers."
(07:49)

However, Ross remains skeptical, suggesting that the cessation of quarterly subscriber reporting signals slower growth:

"I don't expect them to hit that metric because they're not reporting quarterly subscribers anymore. That gave me a sign that subscriber growth is slowing substantially."
(08:52)

Marcus further references research indicating that Netflix might be experiencing subscriber losses in the US, reinforcing the challenges in meeting growth targets.

3. Diversifying Content: Embracing Podcasts and Creators

Netflix is exploring content diversification by potentially integrating video podcasts and attracting content creators from platforms like YouTube. Paul views this as a strategic move:

"If Netflix decides to go in this direction, I think it's, I would be pretty optimistic about it."
(13:13)

Ross agrees, noting the seamless integration of content creators can enhance Netflix’s appeal, especially among younger audiences:

"There'll be like a, a molding where the line becomes less clear. And I would say that type of content producer will become valuable to Netflix."
(11:26)

However, Lucia Moses from Business Insider presents a balanced view, highlighting both opportunities and challenges for creators considering a move to Netflix.

4. Enhancing Discovery with AI-Powered Search

Netflix is investing in AI to improve its content discovery experience. The platform aims to allow users to search for shows based on specific criteria like mood, life stage, or interests, rather than traditional categories. Paul acknowledges the potential:

"If you see the kinds of celebrity deals that Spotify signed... you could easily spin off some podcasts from that, some, you know, video podcasts that would instantly, I think draw a lot of attention."
(13:13)

Ross remains critical of AI's current limitations in search functionalities:

"When AI has been jammed into other search products, it can make them worse... AI just presents some unfactual information more often."
(17:55)

Nonetheless, Paul remains hopeful that AI advancements will eventually enhance Netflix's search capabilities:

"I think that as the technology improves, Netflix will obviously be able to harness that."
(18:44)

5. Advertising Revenue Goals

Netflix is ambitiously targeting $9 billion in worldwide ad revenue by 2030, with projections estimating $2 billion from the US market in the current year. Ross believes this target is achievable due to:

• Significant international expansion potential.
• Development of their own ad tech stack.
• Economic factors such as inflation.

"They still have a lot of room to expand internationally... $9 billion in today's terms. I think we're going to have pretty significant inflation."
(22:15)

However, Paul expresses skepticism about reaching the $9 billion mark by 2030, proposing a more conservative estimate of $8 billion due to:

• Slow initial ramp-up of the ad business.
• Potential limitations in monetization strategies across different regions.

"I think this is a, not just a forward pass, but a Hail Mary... likely get to eight, but not nine."
(24:20)

Ross adds that while progress has been slower than expected, the potential for growth remains substantial, particularly as Netflix continues to build its ad-supported infrastructure.

Conclusion

The episode concludes with a consensus that while Netflix exhibits significant strengths in navigating economic uncertainties and expanding its content offerings, it faces realistic challenges in subscriber growth and monetizing through advertising. The integration of AI and diversification into podcasts represent strategic moves to enhance user engagement and revenue streams. However, achieving ambitious financial targets will require continued innovation and adaptation to evolving market dynamics.

Notable Quotes

• Ross Benish:
  "If a recession got prolonged or was quite severe, people may cancel their accounts or downgrade their tiers."
  (03:45)

• Paul Werner:
  "I think Netflix is frankly going to be the last service left standing if it comes to that."
  (04:54)

• Ross Benish:
  "There'll be like a, a molding where the line becomes less clear."
  (11:26)

• Paul Werner:
  "If Netflix decides to go in this direction, I think it's, I would be pretty optimistic about it."
  (13:13)

• Ross Benish:
  "AI just presents some unfactual information more often."
  (17:55)

• Paul Werner:
  "I think this is a, not just a forward pass, but a Hail Mary."
  (24:20)

Stay Updated: For more insights and detailed analyses on the ever-evolving digital media landscape, tune in to future episodes of Behind the Numbers, available Monday through Friday on your preferred podcast platform.