Netflix released its Q3 earnings after the bell on Tuesday, exceeding forecasts and adding 2.4 million customers, mostly due to growth in Asia. The news was a turnaround from Netflix’s shocking reductions in subscriber growth over the previous two quarters. The stock price of the company increased by more than 14% in after-hours trading as a result of the positive response from Wall Street.
However, even as Netflix resumed acquiring new subscribers, the company’s message to investors startlingly urged them to pay less attention to those exact figures. The streamer has decided to stop offering membership counseling because it is “focusing more and more on revenue as our key top-line indicator.”
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” Netflix said, comparing its $5 billion to $6 billion in annual operating profit.”
Our competitors are heavily investing to drive subscribers and engagement, but it’s hard to build a large, successful streaming business,” Netflix said, comparing its $5 billion to $6 billion in annual operating profit.” We think that their operating losses will add up to more than $10 billion in 2022.
The narrative shift for Netflix, which has for years been primarily concerned with subscriber growth, is “a full 180,” as one executive of a competing streaming service told CNN on Tuesday. What then changed? Wall Street’s perception of the streaming industry has largely deteriorated.
After Netflix’s enormous misstep earlier this year, the day when streamers were rewarded for pursuing subscriptions at any cost is definitely over. A robust company strategy and hearing about sales growth are now much more appealing to Wall Street.
Netflix is attempting to change the narrative by highlighting the fact that its economic model is the most robust among streamers. In doing so, the company openly disparaged its rivals.
While it’s still early, the company noted in its shareholder letter that “we’re starting to see this increased profit focus,” with some companies raising the cost of their streaming services, others cutting back on content spending, and still others cutting back on traditional operating models that could weaken their direct-to-consumer offerings.
In other words, according to CNBC’s Alex Sherman, “Disney, Warner Bros. Discovery, Comcast’s NBCUniversal, Paramount Global, and others want to establish a great streaming business while Netflix is arguing it has built a fantastic streaming business.”