Netflix’s Q3 earnings were announced Tuesday after the bell. They beat expectations and added 2.4 million subscribers. This was largely due to growth in Asia. This news was a complete turnaround from the previous quarter, which saw dramatic declines in subscribers. Wall Street responded positively, with the stock price of Netflix jumping more than 14% after-hours trading.
Netflix did add subscriptions to its service again, but the streamer’s message to investors suggested that they are paying less attention to these numbers. According to the streamer, it will no longer guide its members and stated that revenue is now the company’s primary top-line metric.
This article was first published in the newsletter “Reliable Sources”. Subscribe to the daily digest that tracks the changing media landscape.
Netflix boasted that “Our competitors are investing heavily to drive subscribers, engagement, and revenue, but it is difficult to build a large, profitable streaming business. We estimate they are all losing more than Netflix with their combined 2022 operating losses of well over $10Bn, compared to Netflix’s $5-$6 billion annual operating profit.”
An executive from a rival streaming company stated Tuesday that the narrative shift is “a complete 180” at Netflix. Netflix has for many years been intensely focused on subscriber growth. What has changed? Most importantly, Wall Street’s view of streaming has changed.
After Netflix’s spectacular stumble earlier this year, the era of streamers being rewarded for signing up for subscriptions at all costs is over. Wall Street is now more interested in revenue growth and a solid business model.
Netflix wants to change its narrative and emphasize that it has the best business model of all streaming companies. The company also took a direct shot at its rivals. It stated that while it was still early, it is beginning to see a greater profit focus. “With some increasing prices for streaming services, some reining in content expenditure, and some retrenching about traditional operating models which could dilute their direct-to-consumer offerings.”
It is said that Netflix is claiming it has created a great streaming company, while Warner Bros. and Disney are saying the opposite. Paramount Global, Discovery, Comcast’s NBCUniversal, and Paramount Global all want to create a great streaming company.