- Netflix will stop regularly publishing subscriber statistics starting next year.
- The streaming giant added 9.3 million paying users in the last quarter – a great result that Wall Street normally rewards.
- But Netflix says those numbers no longer reflect its true value. Will Wall Street accept this?
For years, Netflix investors cared about one thing more than anything else: go-go growth, which they measured by the number of subscribers signed up by the streaming company.
From now on, these investors will have to live without this data.
Starting next year, Netflix will stop regularly publishing subscriber statistics, the company announced. Instead, it said in a letter to investors, it will “announce key subscriber milestones as we achieve them.”
This is a major change in how the company interacts with Wall Street. And it comes on the same day that the company announced a huge increase in subscribers: Netflix said it added 9.3 million paying users in the last quarter, about 4 million more than the average forecast of Wall Street.
What is the rationale for change?
Netflix says that’s because it no longer thinks subscriber growth is a good way to understand the company’s progress — something it has been saying in its letters to investors for some time.
Here is the explanation in their words:
“In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential. But now we are generating very substantial profits and free cash flow (FCF). We’re also developing new revenue streams like advertising and our extra member feature, so memberships are just one part of our growth. Additionally, as we have evolved our pricing and plans from a single tier to multiple tiers with different price tiers by country, each additional paid subscription has a. a very different commercial impact.
To drive home this message, last year Netflix stopped providing quarterly forecasts on subscriber growth. But analysts still created their own estimates. But from the first quarter of next year, all this will stop.
Netflix shares are down a bit after the news – which could just be a reaction to the fact that Netflix shares have been down for a while, so even the wowza numbers aren’t enough to wow investors in this moment.
Will Netflix be able to crush it in the future?
But it’s also understandable that investors think Netflix will stop reporting subscriber numbers because those numbers won’t be as impressive in the future.
Which, in reality, is an approximation of the main question surrounding Netflix for a very long time: how big can the company get?
Today, Netflix has nearly 270 million paid subscribers worldwide, making it far larger than its peers. But in recent years, investors have wondered whether Netflix might be stalling — either because of competition from companies like Disney or because there simply aren’t as many people interested in paying for videos , period.
That’s why Netflix’s admission that it lost a million subscribers two years ago shook the entire media world and left everyone wondering: was it a Netflix problem or a streaming problem?
Since then, investors have stopped telling potential Netflix competitors to grow at all costs and started pushing them to care about profits, not subscriber counts (this has also, and it’s not a coincidentally, was synchronized with the end of zero interest rates, which changed the situation). way most investors viewed most companies, period).
Netflix now seems well-prepared for life in this world, too: after spending money for years growing its streaming business, it’s now consistently profitable: this quarter it earned a staggering $2.3 billion. dollars on a turnover of 9.4 billion dollars. although this appears to be partly due to one-off accounting issues.
Will this satisfy investors? On the one hand, it will take some getting used to, and many people will reasonably ask why now? On the other: there are really no rules for how these things work – that’s why Google/Alphabet has provided almost no information about its business forever and has been rewarded with exorbitant inventory during the most of this time. Let’s see if this works for Netflix.
businessinsider
