US streaming giant Netflix ended last year with more than 230 million subscribers worldwide, it said Thursday, beating analysts’ expectations as hits like “Wednesday” and “Harry & Meghan” attracted new viewers.
“2022 was a tough year with a bumpy start but a better ending,” the company said in a letter announcing record fourth-quarter results.
Netflix also announced that co-founder Reed Hastings is stepping down as CEO, ending a 25-year stewardship that has seen the company grow from a DVD rental service to an entertainment juggernaut.
Hastings handed control of Netflix over to his two longtime associates, Chief Operating Officer Greg Peters, and Ted Sarandos, who was the face of Netflix in Hollywood and had already been named co-CEO.
“It feels like yesterday was our IPO; we were covered in red envelopes,” Hastings said during a conference call. “Hopefully some of you have held the stock all 21 years.”
Netflix became a public company in early 2002 with an opening price of $15 per share.
Shares of the streaming TV service rose nearly 7 percent to $337.31 in aftermarket trading following the release of earnings figures.
The Netflix board of directors 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 take on the new job of CEO, noting that it’s a role founders of tech giants often fill, using Amazon’s Jeff Bezos and Microsoft’s Bill Gates as examples.
The changing of the guard was announced as Netflix reported new subscribers that exceeded even the most optimistic expectations.
The streaming giant said it added 7.7 million new members in three months, taking Netflix membership to 230 million people around the world.
Netflix praised a successful slate of new content, including horror comedy Wednesday, and said the spin-off Addams Family was the company’s third most popular series.
The royal documentary Harry & Meghan also scored points, according to Netflix, as did 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 new titles helped attract users to a new, lower-priced Basic with Ads subscription as consumers cut back on entertainment spending amid rising inflation and an uncertain economy.
Revenue for the October-December period of $7.85 billion was in line with estimates.
Netflix insists that counting new users is no longer the most important criterion for assessing the company’s health and that revenue should be the key metric instead.
“What’s potentially getting lost in the mix is that some new subscribers — we don’t know how many — probably came in at Netflix’s ad-supported tier,” said Paul Verna, chief analyst at Insider Intelligence.
“That most likely means lower average earnings per subscriber, which is a measure Wall Street will pay more attention to as Netflix’s advertising business grows,” he said.
Among Netflix’s goals this year is to “nudge” viewers who use passwords shared by subscribers to pay their own way.
“We have great confidence in our ability to grow revenue throughout the year as we scale ads and roll out paid sharing (accounts),” said Spencer Neumann, Netflix’s chief financial officer.
Netflix faces stiff competition from well-funded rivals, including Disney+, which has also introduced an ad-based subscription.
But despite the challenges, Netflix is one of the rare tech giants to win Wall Street’s trust with its share price rising nearly 50 percent over the past six months.
Other tech giants and Disney have been pounded into markets as companies lay off employees and cut costs after a massive hiring and spending frenzy at the height of the coronavirus pandemic.
© 2023 AFP