Netflix reported stronger that expected fourth-quarter 2022 earnings on Thursday, January 19, 2023, but that wasn’t the biggest news of the day for the video streaming giant. Reed Hastings has announced that he’s stepping down from his leadership role and taking control of the the streaming platform’s Board of Directors.
Most of 2022 was tough for Netflix. They lost over 200,000 subscribers in Q1 and over 1,000,000 in Q2. The platform was also criticized heavily by users for the abrupt cancellation of potentially great content as well as for announcing a password-sharing crackdown. In addition, the announcement of a new Ad Tier (Basic with Ads) caused some uncertainty.
Even with all of that criticism from consumers, and a lot of new questions about the plan to purchase 300 acres on the Jersey Shore to build one of the largest television/movie studios in North America, Netlfix had a very robust Q4 2022.
The Q4 Turnaround
According to their Q4 report, Netflix bounced back with a big increase in subscriber growth. Netflix added a net 7.66 million new subscribers in Q4, beating its own prediction of 4.5 million. This resulted in Netflix ending 2022 with 230.75 million subscribers worldwide which beat their projected number of 227.59 million. This turned out to be an increase of 4% year-over-year subscriber growth for Netflix.
Within that number, 910,000 came from the U.S. and Canada, 3.2 million from Europe, the Middle East, and Africa, 1.76 million from Latin America, and 1.8 million from the Asia-Pacific region.
Netflix has previously stated that they grew by 2.41 million subscribers in Q3, which included 100,000 in the U.S. and Canada. Based on those numbers, Netflix wasn’t expecting substantial subscriber growth in Q4. However, although precise numbers weren’t revealed, it looks like their new Ad-plan tier has attracted a substantial number of new subscribers.
However, while revenue was up, net profit figures for Q4 came in well below Netflix’s own projection of 36 cents per share. The reason for the lower profit was due to “a $462 million non-cash unrealized loss from the F/X remeasurement on our Euro-denominated debt as a result of the depreciation of the U.S. dollar vs. the Euro during Q4 2022,” according to Netflix.
Netflix has stated “Now that we are a decade into our original programming initiative and have successfully scaled it, we are past the most cash-intensive phase of this buildout. As a result, we believe we will now be generating sustained, positive annual free cash flow going forward. Assuming no material swings in F/X, we expect at least $3B of FCF (Free Cash Flow) for the full year 2023.”
In addition to the good growth numbers, it was also announced that Reed Hastings is stepping down as co-CEO, but will stay on as Company Chairman.
As a result, Ted Sarandos, the other current co-CEO and Chief Content Officer, and Greg Peters, Chief Product Officer and former COO, will function as co-CEOs.
In addition, Bela Bajaria was promoted to Chief Content Officer, and Scott Stuber was promoted to the film chairman position.
Other things spotlighted by Netflix included:
- The Q4 content slate outperformed expectations: Wednesday was the third most popular Netflix series ever, Harry & Meghan, was the second most popular documentary series, Troll, was the most popular non-English film, and Glass Onion: A Knives Out Mystery was Netflix’s fourth most popular film.
- The lower-priced ad-supported plan (Basic with Ads) was launched in November 2022 and the early results are positive.
- Basic with Ads: $6.99/month
- Basic: $9.99/month
- Standard: $15.49/month
- Premium: $19.99/month
What to Expect From Netflix in 2023
Although profit was slightly down, increasing subscriber numbers are a good sign. Here are some things to watch on Netflix in 2023:
- Fine-tune the Ad-supported plan (aka Basic with Ads). Find out what content mix and price point works and doesn’t work.
- Two-Prong Password Sharing Crackdown: Netflix will be expanding its password-sharing crackdown initiative, which also includes the institution of a paid-password sharing plan.
- The 2023 Original Movie list has been announced. Although Netflix is trimming the number of movies and shows, it has announced a tentative list of 49 movies for release in 2023.
- With the purchase of property at Fort Monmouth NJ finalized in 2022, planning and construction for Netflix’s newest production studio is on track.
According to Netflix: “Later in Q1 (2023), we expect to start rolling out paid sharing more broadly. Today’s widespread account sharing (100M+ households) undermines our long-term ability to invest in and improve Netflix, as well as build our business. While our terms of use limit the use of Netflix to a household, we recognize this is a change for members who share their account more broadly. So we’ve worked hard to build additional new features that improve the Netflix experience, including the ability for members to review which devices are using their account and to transfer a profile to a new account. As we roll out paid sharing, members in many countries will also have the option to pay extra if they want to share Netflix with people they don’t live with. As is the case today, all members will be able to watch while traveling, whether on a TV or mobile device.”
Netflix Corporate References
Related Reading
