Netflix subscribers surge in Q4 2022 post ad tier launch; co-founder Hastings steps down as CEO
Streaming giant Netflix has released its fourth-quarter result for 2022. Following the introduction of an ad-supported tier, this saw significant subscriber growth compared to Q3 2022, but a slight dip in revenue.
The company posted quarterly revenue of US$7.85 billion (A$11.35 billion), slightly outperforming the forecast but did not reverse its declining revenue trend. The quarter also saw Netflix posting a 7.66 million subscriber gain, outpacing any other periods in 2022.
[click to enlarge]: Netflix Q4 breakdown
The quarter’s 1.9% year-on-year (YoY) growth was driven by a 4% increase in average paid memberships. The ARM (average revenue per membership), however, declined 2% YoY.
For APAC, the fourth quarter revenue came to US$857 million (A$1.24 billion), with an additional 1.8 million paid memberships added into the region, compared to 1.43 million in Q3.
[click to enlarge]: Netflix Q4 APAC breakdown
Netflix finished the full year with 231 million paid memberships and US$32 billion (A$46.3 billion) in revenue, and said to have delivered on the high end of its operating profit margin target. Gross debt at quarter end totalled US$14 billion (A$20.26 billion), in-line with the targeted range between $10-15 billion (A$14.47-21.7 billion).
In a letter to shareholders, the company said it would continue to work on aspects of the ad-supported tier including targeting and measurement. However, it noted that engagement at the lower-price point plan is consistent with that on ad-free plans.
Paid sharing, Netflix said, will also be rolled out more broadly in Q1 2023, where members will have the option to pay additional fees to share their subscription with people they don’t live with.
Reed Hastings. Source: Wikimedia
On the company structure front, Ted Sarandos and Greg Peters are now co-CEOs of Netflix, with Reed Hastings as executive chairman.
Sarandos was promoted to co-CEO alongside Hastings in 2020, and Peters to chief operating officer. In an announcement today, Hastings, one of Netflix’s founders, said he wanted to “pass the CEO baton to others”.
“It was a baptism by fire, given COVID and recent challenges within our business. But they’ve both managed incredibly well, ensuring Netflix continues to improve and developing a clear path to reaccelerate our revenue and earnings growth,” said Hastings. “So the board and I believe it’s the right time to complete my succession.”
Regarding competition, Netflix said market opportunities for streamers like itself are still vast. “It’s not easy to build a large and profitable streaming business. But we’re competing from a position of strength, as we lead the industry in terms of engagement, revenue and streaming profit,” it said in the letter.
“As a pure-play streaming company, we’re also not anchored to shrinking legacy business models, like traditional entertainment firms, allowing us to lean hard into the big growth opportunity ahead of us.”
Netflix’s stock surged after hours following the announcement. Its market capitalisation sits at US$315.78 billion (A$456.91 billion) and trades at US$315.78 (A$456.91) on 20 January.
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Darcy Song was a reporter at Mumbrella, covering media owners, adtech and social platforms. She left in October 2023.
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