The 5 Biggest Takeaways From Netflix’s Earnings Report

As Hollywood faces challenges amid ongoing industry strikes, streaming giant Netflix had reason to celebrate on Wednesday with the release of its earnings report. The company’s long-anticipated plans to clamp down on password sharing yielded positive results, boosting subscriber growth and impressing investors. However, Wall Street expressed some disappointment despite the promising figures.

Here are the key highlights from Netflix’s earnings report:

5.9 Million Subscribers Added

Netflix’s efforts to crack down on password sharing paid off handsomely, as the company added a staggering 5.9 million subscribers during the quarter. This growth came just one year after a net loss of nearly a million subscribers. With this impressive gain, Netflix now boasts a total of 238 million global subscribers. The company reported that “sign-ups are already exceeding cancellations,” and it plans to implement the password policy worldwide.

Narrow Revenue Miss and Concerns Over Streaming Profits:

Despite the strong subscriber growth, Netflix narrowly missed revenue expectations, leading to an 8% decline in its stock. Analysts remain concerned about streaming profits, an issue affecting the entire industry. Some experts believe that new subscribers are opting for Netflix’s lower-priced plans, impacting overall revenue. Nonetheless, Netflix’s profitable streaming model still places it in a league of its own, outshining legacy media competitors.

Increased Free Cash Flow

Netflix reported a boost in free cash flow by $1.5 billion, totalling approximately $5 billion for the year. The company attributed this increase to “lower cash content spend” amidst the ongoing writers’ and actors’ strikes that halted content production across the industry.

Acknowledging Strikes’ Impact

During the earnings call, co-chief executive Ted Sarandos addressed the strikes that have affected the entertainment industry. He emphasized that Netflix did not desire the outcome of these dual strikes and reiterated the company’s commitment to constant negotiations with industry professionals.

Ad-Free Plan Changes

In a move to drive subscribers towards the ad-supported model, Netflix discontinued its cheapest ad-free option priced at $9.99 in the US and the UK. While existing subscribers will not be affected, new customers will no longer have access to this plan. The company has previously stated that the ad-supported model demonstrated better economics than the ad-free model.

Despite the mixed response from Wall Street, Netflix’s impressive subscriber growth and increased free cash flow demonstrate the streaming giant’s resilience amidst challenging industry circumstances. As Hollywood navigates the ongoing strikes, Netflix continues to be a dominant player in the global streaming market, promising further growth and innovation in the coming months.