Interesting news on the streaming front: Netflix reported its Q4 2022 earnings yesterday, and the platform outperformed its goal for new subscribers to close out the year. Variety reports that the numbers exceed Netflix’s target of 4.5 million additions with 7.66 new subscribers. This comes after Netflix already reported 2.41 net new subscribers for Q3 last year. That equates to a 4% year-by-year growth in total subscriptions to close out 2022. Not bad, considering Netflix faced its most tumultuous financial year yet, which prompted the company to introduce a cheaper, ad-supported plan to its streaming platform.
“2022 was a tough year, with a bumpy start but a brighter finish,” Netflix said in their letter to shareholders yesterday. “We believe we have a clear path to reaccelerate our revenue growth: continuing to improve all aspects of Netflix, launching paid sharing and building our ads offering. As always, our north stars remain pleasing our members and building even greater profitability over time.” In their letter, Netflix also stated that its free-spending years are behind them. “We are past the most cash intensive phase of this buildout,” Netflix continued. “As a result, we believe we will now be generating sustained, positive annual free cash flow going forward.”
So what does that mean for Netflix subscribers? Since the new ad-supported subscription model exceeded expectations, Netflix feels confident it can maintain its stranglehold on the streaming industry over its competitors. But it also means they’ll continue to streamline their approach to original programming, something they already started doing this year. Basically, Netflix aims to produce more quality content instead of a sheer quantity, a model more reminiscent of HBO’s programming. There will still be a glut of new Netflix content out every month, but produced under a more considered approach with future profitability in mind.
But Netflix had another bombshell announcement yesterday: Reed Hastings, a Netflix co-founder, has stepped down as co-CEO, with chief product officer and COO Greg Peters replacing him alongside Ted Sarandos. Hastings doesn’t leave Netflix entirely, however. Instead, he moves to an executive chairman position on the company’s board; so, still a role of considerable influence, but a move that also suggests the company’s current paradigm shift.
“Ted & Greg are now co-CEOs,” tweeted Hastings yesterday. “After 15 years together we have a great shorthand & I’m so confident in their leadership. Twice the heart, double the ability to please members & accelerate growth. Proud to serve as Executive Chairman for many years to come.” Hasting’s departure as co-CEO came amidst some other leadership shuffling at Netflix yesterday. Bela Bajaria become’s Netflix’s chief content officer, moving from her former role as head of global TV, and Scott Stuber, former head of global films, shifts to a new title of chairman of Netflix Film.
Again, what does this mean for Netflix subscribers? Well, it means that Netflix is wholly committed to this transitional period they’re undergoing. With their new ad-based model, Netflix wants new leadership to navigate an adjusted path to continued earnings and revenue growth, and Hasting’s exit from the co-CEO role confirms that. On the viewership front, this doesn’t mean any immediate changes outside of what 2022 already suggested. Netflix will be more particular in what projects they spend money on from here on out to guarantee they continue to make money, but they’ll still produce a lot of new content for their subscribers. So, a subtle shift in Netflix’s hierarchy and business model, but the more things change, the more they stay the same.
