Netflix boosts Wall Street with surprising subscriber growth
Netflix is set to propel Wall Street higher when trading resumes on Wednesday, following the streaming giant's remarkable performance in adding more subscribers than anticipated for the three months ending in December 2023.
In October of last year, Netflix projected an increase of approximately 8 to 8.7 million new customers, a figure in line with its previous quarter's performance. However, in its post-market close results announced on Tuesday, Netflix revealed an astonishing 13 million (50% higher than forecasted) surge in subscriber numbers, bringing the total to just over 260 million for the fourth quarter alone. This exceptional performance led to a total addition of over 30 million subscribers for the entire year.
The news instantly drove Netflix shares up by over 6% in after-hours trading. On Tuesday, Netflix shares had closed at $US492.19, marking a year-to-date increase of just over 5%, while the S&P 500 had risen by 2.57%.
Despite the impressive subscriber growth, the company did fall short of earnings per share forecasts and narrowly exceeded Wall Street's expectations for total revenue compared to the previous year's quarter, mainly due to the ongoing impact of a recent price increase.
Wall Street analysts had predicted subscriber additions between 8 million and 9 million for the period, with a consensus revenue estimate of $US8.71 billion and earnings per share (EPS) of $US2.20. In reality, Netflix reported figures of $US8.8 billion in revenue and $US2.11 in EPS.
The disruption caused by the US writers' and actors' strikes toward the end of 2023 did affect Netflix's programming but also led to the removal of a significant amount of content from linear TV channels, leaving primarily sports content behind. Two of Netflix's ongoing initiatives, advertising and combating paid password sharing, continued to boost subscriptions and revenues.
In November, Netflix reported that its $US7-a-month ad tier had generated 15 million monthly active users, which had risen to 23 million by the present month, according to internal projections.
Simultaneously, Netflix announced a major programming coup on the same day as its earnings report. The company revealed its acquisition of the rights to "Monday Night Raw" and other WWE programming in a $US5 billion, 10-year deal. Starting in January of the following year, Netflix will become the exclusive home of "Raw" in the US, Canada, UK, and Latin America. Additional territories will be added over time. The cable channel USA Network, owned by Comcast, had previously aired the "Raw" franchise since its inception in January 1993.
Although WWE programming falls into the category of "sports entertainment" rather than traditional sports, its fan base is deeply entrenched in US sports culture, making this move a significant shift towards streaming in the sports industry. Streaming services have started luring away major live sports events from traditional TV, with Amazon's Prime Video securing an 11-year exclusive on NFL Thursday Night Football in 2022, Apple entering the streaming of Major League Baseball, and ESPN preparing to launch a full direct-to-consumer version next year.
In addition to its subscriber growth and programming deals, Netflix further solidified its position in the entertainment industry by receiving the highest number of overall Oscar nominations among all distributors for the fourth time in the past five years, with a total of 18 nominations.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.