US streaming giant Netflix ended last year with more than 230 million global subscribers, it said Thursday, beating analysts’ expectations as hits such as “Wednesday” and “Harry & Meghan” enticed new viewers.
“2022 was a tough year, with a bumpy start but a brighter finish,” the company said in a letter announcing bumper fourth quarter earnings.
Co-founder step downs
Netflix also announced that co-founder Reed Hastings was standing down as CEO, ending a 25-year leadership that saw the company grow from a rent-by-mail DVD service to an entertainment juggernaut.
Hastings ceded control of Netflix to his two longtime associates Chief Operating Officer Greg Peters and Ted Sarandos, who has been 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 an earnings call.
“Hopefully, some of you have held the stock for all 21 years.”
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Netflix became a publicly traded company in early 2002 at an opening price of $15 a share.
Shares in the streaming television service were up nearly 7 per cent to $337.31 in after-market trades that followed the release of the earnings figures.
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 take, 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 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 criterion 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 per cent 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.