Netflix Q4 Earnings Call: 5 Quick Takes
DALL-E
This should put a pause on the “streaming is dying” narrative. I’m thinking “legacy media companies can’t do streaming” makes a comeback until one of those companies has a good quarter, anyway.
Carriage and Retrans has never been part of Netflix’s DNA and so while they have at times overspent and overstaffed, they’ve never had the money tree in the backyard and so the overspending has been for a reason, not just because they could. Hence the positive free cash flow.
I see people contorting themselves into pretzels to find numbers that might give a clue to how much of the subscriber growth was due to the introduction of the ad-supported tier. This is silly—they didn’t say and so we don’t know. That said, I do suspect that word-of-mouth will play a large role in growth on that front. Meaning people will be curious about it, but afraid to take the leap until they hear from someone (IRL or online) who has switched and likes it because the ad load is low and unintrusive and free from pharma ads.
It’s still not clear how much of the subscriber growth stems from a soon to be routine Q4 bump where people sign on to binge series they’d missed over the holidays or use Netflix to find something the entire family would want to watch together. This is of course helped by Netflix having a bunch of shows and movies people wanted to watch, from Glass Onion to Wednesday to Harry and Meghan…not to mention another season of The Crown. Audiences are always going to be fickle and they’ll only subscribe if there’s something they know they want to watch.
Netflix is being smart about the coming password sharing crackdown. Rather than framing it as punitive, they’re framing it as having to switch to a different plan to have multiple people on your account. That means that Mom and Dad can still pay for their college students’ Netflix and keep everything on a single account. This will keep subscriber numbers stable or growing too, as they can now count those college students as additional subscribers.
