Netflix reports strong growth and new boss duo

Dhe streaming service Netflix has caused some disappointments over the past year, but with its fourth-quarter figures presented on Thursday after the market close, it managed to close the market on a positive note. He gained significantly more subscribers than expected. The share price rose more than 6 percent in after-hours trading on Thursday. Netflix stock has lost more than 50 percent in value over the past year.

The figures were presented with the announcement of yet another change in top management. Co-Founder Reed Hastings is stepping down from his position as Co-Chairman, which he previously held with Ted Sarandos. He will take some time off from operational business, but will still play an important role as Executive Chairman of the Board of Directors.

Hastings moves to the board of directors

In addition to Sarandos, Greg Peters, who was previously responsible for day-to-day operations as Chief Operating Officer, will become the new co-CEO. Netflix has had the dual leadership for around two and a half years, until then Hastings was the sole CEO. The company described the repeated change as having been planned for a long time “to complete our succession process”.

Reed Hastings at a conference in Beverly Hills, California on October 18, 2021

Reed Hastings at a conference in Beverly Hills, California on October 18, 2021

Image: Reuters

Netflix said of the past year, “2022 was a tough year, with a bumpy start but a brighter ending.” Netflix experienced unusual declines in subscriber numbers in both the first and second quarters. The third quarter was up again and the last three months have been even better. Netflix added 7.7 million subscribers, well above its own forecast of 4.5 million new subscribers.

The largest increase was in Europe. Globally, Netflix now has a total of almost 231 million subscribers. The company said it released some of the most popular content in its history during the fourth quarter, including the television series Wednesday and the documentary series Harry & Meghan.

Netflix blamed macroeconomic factors like inflation and increased competition for last year’s slowdown. One of the most important competitors is Disney+, the streaming service of the entertainment group Walt Disney. Of course, Disney isn’t free from worries either.

Disney+ has grown rapidly, but the group has recently reported huge losses for this and its other streaming services. This is believed to be one of the reasons why he recently changed his leadership and brought back his former CEO, Bob Iger.

Netflix, on the other hand, is profitable, reporting full-year 2022 net income of $4.5 billion. However, earnings for the fourth quarter were very low and also fell short of analysts’ expectations. Netflix cited negative currency effects as one reason. Revenue rose 2 percent year over year to $7.9 billion, in line with expectations.

Amid the troubles of the past year, Netflix has made some notable strategy shifts. In November, the company launched a cheaper subscription. For the lower price, users are willing to watch ads. In Germany, this service costs €4.99, which is well below the previously cheapest ad-free subscription of €7.99.

Cheaper subscription with more ads

Netflix expressed satisfaction with the launch of the new subscription, but acknowledged that the project is still in its early stages and that there is room for improvement, such as targeting advertising to specific audiences. The company further said very few customers have switched from ad-free to an ad-supported subscription. That’s an encouraging statement, as the industry has warned of the danger that the cheaper service could have a cannibalizing effect.

In the future, Netflix also wants to try more to ask previous free users to checkout who use the passwords of paying customers. Corresponding initiatives are to be implemented on a broader front in the course of this quarter, it was said on Thursday. The company said it expects to see some subscription cancellations in response, but over the longer term the effect on sales will be positive.

Looking to the future, Netflix spread optimism. The company sees a “clear path” to accelerate revenue growth. An increase of 4 percent is expected for the first quarter. When it comes to the number of subscribers, on the other hand, Netflix expects only “modest” growth this time, a specific number was not given. The strong development in the fourth quarter suggests that some of the growth that would otherwise have been seen in the first quarter has been brought forward.

Hastings founded Netflix with Marc Randolph in California in 1997. The company, which initially rented DVDs and mailed them out, launched a streaming service in the US in 2007. With in-house productions of series and films, Netflix has had great success and is the market leader among streaming providers, the number of which has grown significantly in recent years.

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