Netflix is finally closing the book on perhaps its most lucrative show ever, and the streaming giant is laughing all the way to the bank. The first four episodes of the fifth season of the monster hit “Stranger Things” are now available for streaming.
All four previous seasons of the show climbed back into Netflix’s worldwide Top 10, a first for any show. That reinvigorated binge-watching might dip into Netflix’s backlist, which is a financial generator that people typically forget about.
Meanwhile, because Season 5 is said to be one of the most expensive TV shows ever made, investors may soon be able to see whether this huge gamble pays off.
As executive producer Shawn Levy put it,
That sentence makes it clear what’s at stake: not only closure for fans, but also a big test of whether streaming tentpoles can really justify big expenditures.
When Stranger Things viewership surges, Netflix Top 10 reveals more than hype
All four prior seasons of the program made it into Netflix’s worldwide Top 10 TV list before the first four episodes were out on Nov. 26. This was the first time any show on the platform did this.
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Season 1, which came out over ten years ago, came in third with 4.1 million views. Season 4 came in at number 5, while Seasons 2 and 3 came in at numbers 7 and 9, respectively. That’s not merely a feeling of the past. That’s a storm of money coming.
Legacy content drives advertising revenue and TV show revenue with little new cost
What earnings previews don’t often talk about is how much money legacy material makes when it gets more views. Based on internal data and average runtimes, the four back seasons got almost 115 million hours of viewing time in only one week.
That meant:
- Roughly $6 million to $20 million in advertising revenue from catalog titles
- Near-zero amortization cost, since Seasons 1 through 3 are fully paid off
- Pure margin flowing straight into operating income
It’s hidden EPS leverage that kicks in before the first frame of the new season ever airs.
Stranger Things Season 5 may lead expensive TV shows in both cost and potential return
Make no mistake about it. One of the most costly TV shows ever made is Season 5. Time magazine and other industry sources say that Netflix is paying between $50 million and $60 million on each episode.
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That means the eight-episode run is:
- Season 5 production cost: $400 million to $480 million
- Season 4 (at $30 million per episode): roughly $270 million
- Franchise total (including S5): near $1 billion before marketing
Netflix’s accounting method means that more than 90% of the cost of content is spread out across four years, so that spending shows up on the income statement right away.
Netflix subscriber retention benefits from Stranger Things characters and long-term engagement
Netflix will probably recognize around 35% of Season 5’s cost in the fourth quarter, which is between $155 million and $170 million. It is apparent that the first hit will be much bigger if you spend an extra $50 million to $100 million on marketing. But the drag may not be as awful as it seems.
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Netflix’s income generators are in action as back-catalog viewing and ad-tier impressions rise. The base-case effect on profits per share is anticipated to be between minus 5 cents and minus 20 cents, which is manageable and only lasts for a short time.
The Stranger Things franchise expands
When “Stranger Things” is the most popular show on Netflix, the company receives something more significant than short-term viewership: it keeps people from leaving.
Nielsen says that the show was the most viewed in the US in 2022, even though it only had 34 episodes at the time. That involvement lowers cancellations and helps keep prices high. At Netflix’s current average income per membership:
- Average Revenue Per User: approx. $16.64/month globally
- Subscribers retained or added: 1,000,000
- 1,000,000 subscribers × $16.64/month = $16.64 million in added revenue
If that 1 million members stayed or got new ones over the course of two months, the number would double to $33.28 million, and so on.
Stranger Things merchandise and brand ecosystem unlock new revenue streams
Netflix has turned “Stranger Things” into a brand ecosystem. In addition to streaming income, the corporation layered in:
- A contract with Jazwares to make action figures and toys
- A Broadway-quality theatrical production has already made over $30 million
- Events that let people get involved and store promotions that go along with Season 5
These don’t bring in money from subscribers, but they do produce long-term financial flows; diversifying the pie is always helpful.
The financial impact of Stranger Things
It costs a lot of money to make Season 5 of “Stranger Things.” That will be in Netflix’s fourth-quarter numbers. But so will more money from ads, fewer customers leaving, and brand momentum. Parrot Analytics estimates the series has already made more than $1 billion in sales since 2020.
Over the following four years, the last season might contribute between 8 cents and $1.90 to cumulative EPS. This will depend on how many ads are shown, how many people watch, and how long they replay. The basic casing comes out to around 72 cents.
