Friday, January 27, 2023

Netflix co-founder quits, Subscribers increase to 230 million

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Netflix reported Thursday that it had more than 230 million global subscribers at the end of last year, exceeding analysts’ expectations as hits like “Wednesday” and “Harry & Meghan” drew in new viewers.

In a letter announcing record fourth-quarter earnings, the company claimed that “2022 was a tough year, with a bumpy start but a brighter finish.”

Netflix revealed that co-founder Reed Hastings would step down from his position as CEO after 25 years, overseeing the company’s transformation from a DVD rental service to an entertainment behemoth.

Reed handed over control of Netflix to two long-term associates, Chief Operating Officer Greg Peters and Ted Sarandos, who has been the face of Netflix in Hollywood and was already named co-CEO.

“It feels like yesterday was our IPO; we were covered in red envelopes,” Hastings said during an earnings call.

“Hopefully, some of you have held the stock for all 21 years.”

Netflix went public in early 2002, with an initial stock price of $15 per share.

Following the release of the earnings figures, shares of the streaming television service rose nearly 7% to $337.31 in after-market trades.

The Netflix board has been discussing succession planning for many years, Hastings pointed out in a blog post, joking “even founders need to evolve!”

He said he would hold the new job of executive chairman, noting this was a role that tech giant founders often took, using Amazon’s Jeff Bezos and Microsoft’s Bill Gates as examples.

The changing of the guard was announced as Netflix posted added subscribers that blew past even the most optimistic expectations.

The streaming giant said it enticed 7.7 million new members in three months, bringing Netflix membership around the world to 230 million people.

Netflix praised a successful slate of new content that included horror-themed comedy “Wednesday,” saying the “Addams Family” spinoff was the company’s third most popular series ever.

Royal tell-all documentary “Harry & Meghan” also scored, Netflix said, as well as “Glass Onion: A Knives Out Mystery” starring Daniel Craig.

“This is in stark contrast to the first half of the year. Creating the next biggest blockbuster drives subscribers,” said tech and media analyst Paolo Pescatore.

The fresh titles helped attract users to a new lower-priced “Basic with Ads” subscription, as consumers cut back on their entertainment spending amid soaring inflation and an uncertain economy.

Revenue in the October to December period, at $7.85 billion, was in line with estimates.

Netflix insists that counting new users is no longer the most important criteria for assessing the company’s health and that revenue should instead be the main metric.

“What may be getting lost in the mix is that some number of new subscribers – we don’t know how many – likely came in on Netflix’s ad-supported tier,” said Insider Intelligence principal analyst Paul Verna.

“That means, most likely, lower average revenue per subscriber, which is a measure Wall Street will be paying more attention to as Netflix’s ad businesses scales up,” he said.

Netflix goals this year include “nudging” viewers who use passwords shared by subscribers to pay their own way.

“We have high confidence in our ability to accelerate revenue throughout the course of the year as we scale ads and we launch paid sharing (of accounts),” said Netflix chief financial officer Spencer Neumann.

Netflix faces strong competition from deep-pocketed rivals, including Disney+, which has also introduced an ad-based subscription.

But despite the challenges, Netflix is one of the rare tech giants to have garnered confidence from Wall Street with its share price up almost 50 percent in the past six months.

Other tech giants and Disney have been hammered on the markets as firms lay off employees and cut costs after a massive hiring and spending spree at the height of the coronavirus pandemic.

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