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Behind the Numbers: an EMARKETER Podcast
The WBD Deal? Netflix’s Ads in 2026? — What Are the 3 Big Questions for Netflix? | Behind the Numbers
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Foreign.
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Hey, gang. It's Monday, February 2nd. Ross Anderson. Welcome to behind the Numbers, the marketer video podcast made possible by ctag. I'm Marcus, and joining me for today's conversation, we have one chap, senior advertising and media analyst Ross Benish, living in New York State. Welcome to the show.
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B
Hey, Marcus. Good to be here.
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Hey, fella. Thank you for your time. We start, of course, with the fact of the day. So, Ross, today I'm talking about the red advantage. What does that mean? In 2005, Russell Hill and Robert Barton of the University of Durham. So 20 years ago in the UK found that wearing the color red made you more likely to win in sports with 56% of victories. So not by a massive amount, but statistically. They did a study on it and found numerous times people who all read one 56% of the time against closely matched competitors versus the athlete. Yeah, one athlete in red, one in whatever other color, blue, whatever. The one in red won more often than not. Tim Radford of the Guardian explains that redness indicates anger, testosterone, and aggression in humans. That red plays a big role in signaling superiority throughout the animal world. However, more recent data up to 2020 shows that the red advantage has disappeared. Researchers suggest that rule changes and technology which eliminate referee bias could be behind it. And so, Ross, I thought this could help explain Nebraska football's recent struggles, where red used to be good, less so now.
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That's probably what changed the data going from winning 90% of your games to, like, 45. Skewed the whole database against red. That's as good of that explanation as I've got.
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Sorry, Cornhuskers. There's always next season.
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And the basketball team is the top five right now.
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Hello. They wear red. Or is it. Oh, yeah, of course. Okay.
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Well, they were white at home because it's not the NBA. And there's actually consistency in uniforms. They wear white at home and red on the road.
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All right, then at least you've got one program. And volleyball? You also good at volleyball?
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Oh, yeah, yeah, yeah.
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And volleyball, yeah.
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They lost in the Elite Eight this year, but they were undefeated until then. Number one all year, but historically good.
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Okay.
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All right.
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Very nice. Well, today's real Topic is the three big questions surrounding Netflix at the moment. All right, let's set the table first. So full year 2025, Netflix said that it had over 325 million subscribers worldwide. That's up from 301 a year prior. So an 8% uptick. Total 2025 revenue reached 45 billion. That's up 16% year over year. That's the same as 2024's full year revenue growth. Some subscribers did well. Revenue did very well. Q4 though, zooming in. Total revenue grew 19% in Q4 to cross the 12 billion mark. That's its fastest growing quarter, Ross. In four and a half years, so not bad. Net income was up two and a half billion. It's nearly 30% increase. So they're the numbers. But we want to talk about the what's going on, the big three questions surrounding Netflix. And so let's go throw a bunch of ideas into the, into the middle, into the ring and then figure out what we think is the top three big concerns or things that Netflix should be is thinking about. The first one, Ross, I have is will Netflix actually be able to buy Warner Brothers Discovery? Todd Spangler Variety explained the Netflix recently announced it will sweeten its $83 billion deal to buy Warner Brothers Discovery Studios and HBO Max streaming business by switching to an all cash offer, replacing its previous cash and stock agreement. The change was driven by pressure from Paramount Skydance, which has been pursuing a hostile takeover attempts of WBD with what it alleges is a superior deal for WBD shareholders. What do you think of this one being one of the biggest things Netflix is thinking about?
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Well, it's definitely one of the biggest things. Their stock has taken a hit since they've agreed to terms. Investors clearly aren't enamored with WBD as much as Netflix executives are right now with the Warner Brothers thing. What I find interesting is Netflix and Paramount keep going back and forth and no one is actually raising their price really or raising their bid. So Paramount's doing all these things to try to stop Netflix, but they haven't increase their offer. So at this point, I think the only things that could stop Netflix is if a regulatory body squashes the deal or if Paramount decides to like, okay, we're going to focus less on lawsuits and more on raising our bid, you know, because that would sway shareholders more than the tactics they've used so far.
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Yeah. One of our colleagues, Paul Werner had taken was of the opinion that Warner Brothers Discovery acquisition by Netflix won't be settled before the end of 2026, in large part because, as you mentioned, regulatory hurdles. There was a general article noting that President Trump and his advisors, including White House officials, were concerned about the deal. So that could trip it up. But then also, yeah, this idea that Paramount might and the Economist thinks is likely to improve its own bid, currently offering $30 a share for all of Warner, whereas Netflix is offering, call it $28 a share, a little bit less for just its streaming platform and studios, allowing Warner shareholders to hang onto the firm's TV and K1 networks if they do raise the stakes, though. Ross. This piece from the Economist noting Netflix then faces a dilemma. Does it increase it because it's all cash? Switch signals its seriousness about acquiring Warner. But unlike Paramount, which can draw on the Ellison's family fortune in Oracle tech stocks, Netflix has its own shareholders to worry about. And as you mentioned, many of them are not convinced by this project. Netflix's market value has fallen by nearly a third since it began circling the company in October.
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Warner Brothers Discovery has been a company of declining value for some time. So it's interesting to have two large media companies bidding against each other this way and bidding in a way that aggressively exceeds what like the market cap would suggest the price should be for that which believes, you know, they believe there's probably more value in the sum of that company plus their service than there is in just the parts of it alone.
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Yeah, it'll be interesting to see if they do make a higher bid for it, because Netflix, the piece was noting, has a history of walking away when the content prices get too high. Last year they allowed the Ellisons, as they call them Paramount, to outbid it, offering $8 billion for the seven year UFC rights. So maybe there is a price that's too high for Netflix, but for now, Paramount hasn't made it.
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Well, there's also another value in taking Warner Brothers Discovery, aside from just like having the library and being able to monetize it yourself, you're removing a competitor and absorbing it. And that's the case whether it's Paramount or Netflix. Netflix, obviously a competitor on the streaming front, but like Paramount's looking to take the whole entity and, and on the TV network side, you know, Paramount, Warner are like two of the top cable TV companies in the US Even worldwide. Really? Yeah. So, you know, there is a strategic advantage of like, you're going to, you're going to cut the competition and you're going to be the one who takes it in.
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Yeah, we'll see. This was already going to be a long process. David Hayes of Deadline was noting that many investors were uneasy about the 12 to 18 month process in trying to close this acquisition. And Marissa Jones, our Marissa Jones, was writing that the all cash offer, Ross, definitely helps because it could shorten the deal's lengthy timeline by several months, offering a bit more clarity about what is going to be happening with all of these players. The shareholder vote is expected in April, so we'll see. So yeah, I think this has to be for me, probably top of the list. Even though we'll be watching this closely, I'm sure, at least to the end of this year. What else do you think Netflix is paying close attention to at the moment?
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Well, ad revenue would be something I point out they shared for the first time that they made 1.5 billion in 2025. They have alluded to like number of ad supported viewers in the past or percentage growth year over year or, or upfront volume, but they've never given like a specific dollar amount like they did in this release. And what stood out to me is it's quite low. You know, they're clearly, clearly waiting to hit a threshold before they announce. Like 1.5 is a nice, you know, figure that people can wrap their heads around.
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Yeah.
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But it's if you consider the size of their like audience and the ad tiers available in like a dozen countries, that's a very low monetization. Like they're making more money on the ad free tier per member and they even said that too. So, you know, that suggests there's not a lot of time spent among ad supported viewers. If you're reaching a mass audience and around the world making 1.5 billion, those members are not spending that much time per month. The way that Netflix viewers have historically engaged with the platform, you got a lot of casual viewers who are using that as like a third or fourth service when they're on the ad plan is what it looks like. Mm.
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They've grown it well so far though it is still low, but it's grown two and a half fold in the last like year or two. So it is growing well. They also expect the ad revenue to double this year in 2026 to hit that 3 billion dollar milestone. But compared to the 51 billion dollars that they're hoping for, again, it's a very small sliver. What do you make of ad revenue going forwards? What do you think is going to be driving it and how far do you think they can, can take? This will always be a relatively small slither of their Revenue.
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Do you believe that's going to be a small sliver for the foreseeable future? I mean they'd have to, for it to be like a good chunk of the revenue, they'd have to like almost like 10 exit, you know what I mean? Like you're looking at the subscription side is just massively not 10x, but for it to be a good size of their revenue, they're going to have to like greatly exceed their projections. And, and that's probably not realistic. So I, I think it's going to be a nice little revenue stream that pales in comparison to the subscriptions. To get more ad revenue, they just, they need more viewing time on the ad supported tier because they already have relatively high CPMs, they have low ad loads. But they've also indicated that their fill rates like are, you know, where they want them to be. So they probably have some unsold inventory. You just need people spending more time with ad supported viewing. And you know, live events are one way to do that. But like they've even said on the call, live events are a, they're the splashiest things they do and they're doing more of them. But that's a small portion of total Netflix viewing. Even when they have a big fight or, or NFL game that doesn't stack up against like the, you know, billions of hours people are spending watching all these scripted shows.
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And let me ask you this, do you think it's more of a concern for that or more important for them to squeeze more time out of current users or add, keep the, keep the time attributed to each current user the same and add more additional users.
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It's obviously ideal to add more additional users, but they, it's hard to do that in most countries for them at this point because they are so established. Yes, they're so successful. You know, most people who stream are already using Netflix. So at that point I think you need to start driving more time spent with the current users so that the gap in revenue per membership is closer on the ad free plan and the ad tier plan.
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So let me, I agree with you. I had Netflix expecting to Double ad revenue 20, 26 down here. So I think ad revenue definitely is one of their top things. I think this leads me in quite nicely to what I think is the third big question for Netflix at the moment, which is subscriber growth and how concerned they should or shouldn't be about it. I was wondering, Ross, could they, would they, should they introduce a Netflix freemium version as an option? So Netflix, they're competing with YouTube to a certain extent to be the champion of the screen. Netflix added 41 million paid subscribers in 2024. They just added 25 million last year. So from 41 to 25, that means growth went from 16% to 8%. 2024 to 2025. Netflix said that factoring in the number of people watching per household, its total audience is approaching 1 billion people. Globally, we forecast Netflix viewers to be about 835 million worldwide. YouTube has 2.7 billion. And so I wonder if a freemium version with ads, maybe not a billion ads, but more ads than they have on their current one that offers games, podcasts, perhaps a handful of movies and shows to sweeten the deal, could help grow subscribers and get it closer to YouTube scale over time. What do you think?
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Well, that's an interesting way to look at it. I don't know if it would grow subscribers a lot, but it would grow ad revenue. You know, it'd be like a fast channel essentially. So putting some content out there for free to generate more ad viewing makes sense when you consider the success of like YouTube as well as Pluto and Tubi. But they'd be kind of going against the grain a little bit because subscription services used to have free ad supported tiers more often, like several years ago. So what I'm getting at is like, if you go way back, there used to be a free version of Hulu that would have a limited number of shows. It was very ad supported. This is many years, then you go back, you know, more recently there used to be a free tier of Peacock. There also used to be Amazon Freevee, which was before was called IMDb TV. So those things don't exist anymore. Like to get, you know, Peacock and Hulu, you have to pay even if you're on the ad plan, you have to pay a membership fee. So subscription streaming services in recent years have decided it's not worth it for them to offer that free tier. If Netflix decided to do that, I would love to know, like, what their thinking is on what they like, why they would go against that trend. And maybe that is the right move, but it would just be different than what we've seen from others.
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Yeah, yeah, that's a great point. And I want, yeah, maybe, maybe a couple of bucks is what they do at Focus to your point, they're not. No one's doing it for absolutely free. So maybe they generate, yeah, a bit of revenue from charging two, three dollars. But yeah, I didn't know how much of a concern was because it seems like quite a slowdown in growth. You know, you've gone from 16% one year to 8% the next. I mean, what could you be hoping for in this coming year given that trend? Even if you don't cut growth in half, it's still slowing down to what will soon be mid kind of single digits, which is not, not brilliant again, especially compared to someone like a YouTube where you can just, anyone can just switch it on and go, well, if.
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They do complete the warrant deal, they'll also have to contend with. They'll be getting into a whole other line of business and they've been in. So, yeah, you know, they have a lot to manage, like because they could potentially be in theatrical soon if this all goes to plan. And they, they, they keep their promises that they've given about the Warner deal.
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Yeah, yeah. In Netflix's defense, you know, call it, call it a billion. If they're saying approaching a billion global viewers and we say that YouTube is 2.7 billion, at least in the U.S. they're doing incredibly well. Netflix accounting for 9% of all Americans TV time versus YouTube's 13%, Quinton Nielsen. Even if it buys Warner Brothers Discovery Ross, that takes its TV time, Netflix would go from 9 to 10.4. So inching a lot closer to that, to that YouTube number.
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And YouTube's, you know, beating everyone, like, yes, so, so you know, it'd be Netflix YouTuber than everyone else. Like, even if you look at Disney or NBC across their entire portfolio of TV networks plus streaming services like YouTube is out ahead. So it's, you know, if you're, if you're within range of YouTube, even if you're not beating them, I mean, you're doing pretty well. And very commonly used by consumers.
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Yeah, yeah. You basically have to add up the next. Was it three, four. Yeah, Disney. If you add Disney and Prime together, they are still. Yeah, you'd basically add up to what Netflix has right now. And then after that you're talking about three people, companies that are, you know, Roku Channel, 3% of time, Paramount two and a half percent of time, etc. So it is. Yeah, it is those two. And then, then everybody else. All right, so what else do we have? Anything else you want to add to this list of the most important questions for Netflix right now?
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It's a minor question compared to the ones that we've gotten into. But you know, they have video game aspirations and they do talk about them during their earnings calls. I would love to know, like how if they have Like a revenue goal they need to eventually hit for those video games to keep investing in them. Because right now they just kind of come with your subscription and it doesn't seem like they have a lot of engagement. You know, how long do you think you have to be in that space before it starts paying off for you and becomes like a. A real significant part of the business?
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Yeah, it kind of liken it to the Amazon store strategy. You know, like they're trying to do something and they definitely haven't figured it out yet. Do you keep investing or like meta in the metaverse at some point, all those billions of dollars, you know, you've.
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An Apple TV is kind of the same thing.
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Yeah. Yeah, that's a good one. All right, I think we've got our list. Do you have anything else or do you think this is.
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That's a good list.
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It's probably the top three. Yeah. Netflix, will they be able to actually buy Warner Brothers Discovery? What's going to happen? That's number one. Number two, what's going to happen with the ad revenue this year is 1.5 billion decent, considering it's only been selling ads for a couple of years. Or not good enough considering the scale of Netflix. And then also how concerned are they, should they be about subscriber growth and are there other initiatives, ways that they can generate or boost their subscriber numbers? Obviously they stop reporting last year, but they've given us this, this full year number. So no more quarterly.
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Everyone's stopping reporting. Disney is about to stop reporting. We're getting like our last update.
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Disney.
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Yeah.
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Mm. Yeah. Yeah. All right. I think that's a nice clean list. We had pretty much the same thing, so that worked out quite well. That's what we've got time for for this episode. Ross, thank you so much for joining me today.
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Thanks, Marcus.
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Yes, and thank you of course, to the whole process, production crew. Danny and John helping out with this one. And thanks to everyone for listening to Pine the Numbers, the Em Marketed video podcast made possible by Seed Tag. Tune in tomorrow for the Reimagining retail show where host Susie David Canyon will be talking to Paul Verner Blake, Dr. As well. All about advertising at the Super Bowl.