The Amazing Streaming Balancing Act
by Cat Hausler
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When Netflix finally pulled back the red curtain on its latest earnings report last week—the first since the streaming giant announced its entry into the ad-supported streaming space—it answered the burning question that we all had: will they or won’t they see success with this new strategy?
The answer was a resounding yes (and put Wall Street estimates to shame). In the fourth quarter of 2022, they added 7.66 million paid subscribers, more than the 4.57 million forecast, and generated $7.85 billion in revenue (two percent increase year-over-year). And as of January 23rd, their stock price ended the day at $357.42, which is more than double what it was in May 2022. Not to mention management changes, as co-founder Reed Hastings stepped down and appointed Greg Peters, Chief Product and Chief Operating Officer, to join Ted Sarandos as a co-Chief Executive Officer.
Netflix recently announced that they will be eliminating password sharing, entering a multiyear agreement with Nielsen to provide cross-media audience data, and potentially exploring FAST (Free Ad Supported Streaming) this year, and the industry sentiment remains positive. “Netflix traditionally has led in the media business—a lot of the innovations have come from them. Now they’re gearing up to lead some more. I would invest in the management team for them to navigate the ad business, password sharing and generate more growth,” said MNTN President and Chief Executive Officer, Mark Douglas, in an interview with CNBC following the earnings call.
When Douglas was asked about whether now was a good time for Netflix to launch their ad-supported part of the business, he remained positive that the model would succeed despite macroeconomic factors, “I don’t think they [had] a choice. in some ways it’s not [the best time] because you have a lot of supply coming into the market…but you also have demand being pulled back from large brand advertisers…that sets up for a price war, so it’s not an ideal time to launch but i think these advertisers are excited about Netflix at the right price, and so Netflix will still navigate that.”
While Netflix’s earnings paints a positive picture for streaming at large, there is uncertainty on how the elimination of password sharing will impact price sensitive customers. However, the company’s co-CEOs disagree. They look to this challenge as an opportunity to build up what they do best—and that’s their content library. “Our job is over the next couple of years to win all of them back. We won’t do that out of the gate. Some of those folks are borrowing because they’re more price sensitive, they’re less engaged or whatever. But if we deliver a Wednesday every week, if we deliver a Glass Onion every week, we’ll get the vast majority of those viewers back,” said Greg Peters.
Password sharing or not, one thing is clear—there’s no slowing down streaming. As long as advertisers have a winning formula of targeting the right audience on premium (and coveted) content, the sky’s the limit on what they can achieve through Connected TV. Sarandos concludes that “[Streaming is] big business because [it’s] what consumers want…[it is] growing dramatically and it’s growing on the demise of linear television. It’s easy to talk about streaming in one big, broad brush, but there is Netflix and there is everyone else trying to figure out how to do what Netflix is doing.”
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