Netflix, reporting subscriber numbers for the first time since launching an ad-supported subscription tier, brought in 7.66 million subscribers during the fourth quarter of 2022, outperforming its forecasts for the holiday season.
The streaming giant, which now has a total of 230.75 million global subscribers, had previously warned Wall Street it would add around 4.5 million subscribers for the quarter, making it the company’s weakest fourth quarter since 2014. The forecasts led Netflix stock to drop in after-hours trading ahead of Thursday’s earnings report, though the stock is up nearly 10 percent year to date.
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Revenue hit $7.85 million for the fourth quarter and is forecasted to grow to $8.17 million for the first quarter of this year. In the United States and Canada, Netflix added 910,000 subscribers, while its biggest growth region for the quarter, as far as subscribers, was Europe, the Middle East and Africa with 3.2 million sub additions.
“2022 was a tough year, with a bumpy start but a brighter finish. We believe we have a clear path to reaccelerate our revenue growth: continuing to improve all aspects of Netflix, launching paid sharing and building our ads offering,” the company said in a letter to shareholders. “As always, our north stars remain pleasing our members and building even greater profitability over time.”
Netflix has served as a litmus test of sorts for Hollywood and Wall Street’s faith in streaming. When the company began the first half of 2022 with a series of disastrous earnings reports revealing upwards of 970,000 lost subscribers, investors began to panic. Netflix lost billions in market value, and the aftershocks rippled toward other streaming-focused companies like Disney and Warner Bros. Discovery — the former of which took a $1.47 billion hit in streaming losses under former CEO Bob Chapek.
Though Netflix rebounded by its third quarter to add subscribers for the first time that year, the company was forced to reevaluate its past years of big spending and well-documented shunning of advertising. In addition to multiple rounds of layoffs and reined in budgets, Netflix debuted a cheaper, ad-supported subscription tier on Nov. 3 costing $6.99 a month, compared to the $15.49 price tag for the standard plan. The company brought on top executives from Snap, including chief business officer Jeremi Gorman, to lead its ad business. To drive that source of revenue, Netflix will also participate in TV’s Upfronts week in New York this May to pitch ad buyers.
In the investor letter, Netflix said it expected the ad-supported tier to have a modest impact on this year’s revenue and profit given its early-stage development. Subscriptions will still remain in focus for Netflix as it prepares to roll out new enforcements to deter users from mooching off of other Netflix accounts. Beginning this year, Netflix is expected to remind primary account holders to add “sub-accounts,” which allow family and friends to join in on an account for an additional price. During the rollout, Netflix said viewership — as measured by third parties like Nielsen — could be negatively impacted in the short term as “borrowers” transition to their own paid accounts, as seen in earlier password-sharing crackdowns tested in regions like Latin America.
Speaking at an investor conference in December, Netflix co-CEO Ted Sarandos also suggested the company would eventually have multiple different ad tiers but said it was too early to share any specifics. The executive said he didn’t expect to see a lot of “migration” between the subscription plans for users.
Content wise, Netflix ended 2022 strong with a series of breakout hits, including the Tim Burton–led Wednesday, starring Jenna Ortega, and the next installment in Rian Johnson’s Knives Out franchise, Glass Onion. Since its Nov. 23 debut, Wednesday has become the third most-popular series on Netflix, behind Stranger Things and Squid Game, and broke the record — twice — for most hours viewed in a single week by an English-language TV series. The Prince Harry and Meghan Markle docuseries, Harry & Meghan, also cracked the Nielsen charts for Netflix, accounting for 1.69 billion minutes of viewing time in the U.S. from Dec. 12-18.
This year, Netflix is expected to maintain its $17 billion content spend budget, as CFO Spencer Neumann has said in past earnings calls. But this year’s movie slate will be significantly pared back from previous years: The streamer will release a total of 49 feature films, down from the 86 titles initially announced for 2022.
Upcoming titles for this month will include That ’90s Show, a spinoff of That ’70s Show; the Pamela Anderson documentary Pamela, a Love Story; and Kenya Barris’ feature directorial debut You People, which features stars like Jonah Hill, Eddie Murphy and Julia Louis-Dreyfus.
Netflix is also starting the year off with a major leadership shake-up, with Reed Hastings stepping down as co-CEO and elevating Greg Peters to the co-CEO title alongside Sarandos. Hastings will remain on as executive chairman. Former global TV head Bela Bajaria is now the company’s chief content officer, the role most recently held by Sarandos, and Scott Stuber is now the chairman of Netflix Film.
