In 2023, Netflix wants to generate more revenue from its 230 million subscribers
Netflix, which currently has 230.75 million paying subscribers, entered a new era on Thursday with new management that will have to focus on revenue growth, if not more, than subscription growth.
“Our first 25 years have been great. I’m very excited that the next 25 years are going to be great,” company founder Reed Hastings said in an online conference call Thursday.
He had just announced that he had replaced Ted Sarandos as general manager with Greg Peters.
The man who founded the DVD-by-mail rental service in 1997 will nevertheless remain “executive chairman”.
After an extremely difficult 2022 for his company, he is stepping back, even if he comes out with his head held high.
Netflix lost about 1.2 million subscribers in the first half, before rebounding in the spring. It gained 7.66 million new subscribers between October and December, more than expected.
The news cheered Wall Street: after the close of trading, the movement in electronic trading passed nearly 7%.
With the name losing more than 50% of its value in 2022, the service “is under intense pressure to deliver better results for its shareholders,” says Insider Intelligence analyst Paul Verna.
The platform generated $31.6 billion in revenue last year (+6.4% year-over-year), but its annual net profit fell 12% to $4.5 billion.
The Californian group took steps to create new revenue streams last year, and that should pay off this year, starting with a new cheaper subscription, with advertising.
“The promotion of Greg Peters shows the importance of this move for Netflix. As COO, he was the architect of this decision after years of resistance from the company,” responded Paul Verna.
“Just as Sarandos’ rise is a sign of Netflix’s transformation from a technology company to a television and film studio, the current transition puts advertising at the center of action alongside content.”
The expert nevertheless expects a slow start with advertising revenue of $830 million in 2023 due to strong competition, the economic crisis and “the urgent need for Netflix to focus on profitability, not subscription growth.”
Greg Peters welcomed the first steps of the new formula, which was launched in November, and assured that subscribers of the more expensive formulas had not switched en masse to the reduced price subscription.
Chief financial officer Spencer Neumann hopes that advertising will soon make up 10% of turnover, and then “more”.
In the coming weeks and months, the streaming service will force users to pay to add profiles to their accounts instead of sharing their passwords for free.
“It’s not going to be a popular decision,” Greg Peters admitted.
The new co-director expects first a wave of cancellations, and then a return from consumers. “Our job is to have more titles that people definitely want to see,” he said.
With new seasons of hit series like The Crown, Queen Elizabeth II, and Emily in Paris, it’s a good bet for the 2022 holiday season.
New programs, including the phenomenon series “Wednesday” and the documentary series “Harry & Meghan”, in which the royal couple decided to give up the British monarchy, also contributed to the popularity of the platform.
Greg Peters said he “always wants more”: “more users”, “more engagement” and “more revenue streams”.
“Netflix’s cultural impact with The Wednesday, Stranger Things and others is simply amazing and will continue to grow,” he said.
GlobalData analyst Neil Saunders believes Reed Hastings’ semi-departure, who fears the service will become less bold, is “a significant psychological shift for Netflix.”
“Because he remains chairman, the company retains its expertise, but there is little risk that the company’s culture will change and become more cautious, especially in times of economic uncertainty,” he said.