Adding subscribers has been Netflix’s bread and butter for measuring the streamer’s success for as long as it’s been around. But as the company continues to grow, Netflix’s leadership indicated on Tuesday it’s no longer the only metric they want Wall Street and the industry at large to evaluate them on moving forward.
After seeing some positive subscriber growth in Q3 and forecasting an even greater result for Q4 2022, Netflix announced in its letter to shareholders Tuesday that it would no longer provide guidance on the streamer’s paid membership in future quarters. The prediction for Q4 2022 was that Netflix will add 4.5 million more subscribers. However, the internal forecasts regarding paid net additions will be canceled after this quarter.
It’s a “pretty minor change,” as Spencer Wang, Netflix’s VP Finance, IR and Corporate Development, mentioned on Tuesday’s earnings interview. That’s because the streamer will still give shareholders and analysts guidance on everything else, including revenue, operating income, diluted earnings per share and operating margin, and it will even continue to report global and regional paid subscribers.
But as Wang explained, a single subscriber shouldn’t just be compared apples to apples, especially if you’re comparing it to other streaming services. And it’s why Netflix wants you to consider its revenue, which for Q3 beat Wall Street expectations and hit $7.9 billion, as the main metric for its success.
“Focusing on subscribers in our early days was helpful, but now that we have such a wide range of price points, different partnerships all over the world, economic impact of any given subscriber can be quite different,” Wang said. “That’s particularly true if you’re trying to compare our business with other streaming services. So that’s why we’ve been increasingly focused on revenue as our primary, top line metric.”
Netflix will also be developing new revenue streams for 2023. This includes the ad supported pricing tier next month and some solutions to curb password-sharing that will roll out in 2023. “membership is only one aspect of the revenue picture.”
It will be up to Wall Street if they agree with that notion, and Netflix’s stock price has already After hours, the surge was 14%Trading based on these optimistic Q4 forecasts
