Netflix stock (NASDAQ:NFLX) had moved to a 7.4% gain postmarket following a Q4 subscriber success before it launched a live earnings interview that dispensed with recounting the quarter and jumped directly into a Q&A session — after which the stock gained further, up 8.1% after hours.
For its call, the streaming pioneer seemed to lean into its burgeoning moves into live programming: As opposed to recent quarters, where its earnings discussions mirrored its binge-release strategy (a pre-recorded executive interview conducted by a single analyst and then dropped online all at once), this quarter, Netflix launched a live Q&A broadcast on YouTube. Analyst questions were queued and read by Investor Relations chief Spencer Wang to the execs, though.
And in line with the live theme, the first question through was on the company’s deal to bring live WWE wrestling programming to the platform starting in 2025.
“WWE Raw is sports entertainment, which is right in the sweet spot of our fourth business, which is the drama of sport,” co-CEO Ted Sarandos said. “Think of this as 52 weeks; a lot of live programming every week every year. It feeds our desire to expand our live event programming and but most importantly, fans love it.” It should also add some “fuel” to the new and growing ad business, he added.
Since the company has been talking about expanding live programming for a while, it shouldn’t be heavily additive to content spending, Sarandos said: “You should look at this as it fits inside our $17B programming spend now.”
The road ahead
Setting up Netflix’s focus for 2024, the execs said new growth would come with the multiplier of more subs paying increased prices.
The past year “was a pretty unusual year for us; it was essentially all member-driven growth,” CFO Spence Neumann said, noting a long pause on price hikes during the rollouts of the company’s ad-supported service plan and paid sharing (the password-sharing crackdown).
Some revenue help will come from extra members and scaling the advertising business, but “adds will be … the primary driver in ’24,” Neumann said. Beyond that, “we are focused on continually improving our service. If we do that, we’ll have more members, more value that we can occasionally price into, and lots of engagement to build a big and profitable ads business. So, healthy revenue growth with a mixture of volume and ARM [average revenue per member], that’s really the output.”
Advertising
“Our top ads priority — you’ve heard us say before, I think you’ll hear us say it again — is scale,” co-CEO Greg Peters said. The company saw 70% quarter-over-quarter growth, vs. 70% the quarter before and 100% the quarter before that, he noted.
It’s “a good trajectory to be on. We’re now at 23M [monthly active users], and we see that continuing to grow in the quarters ahead,” Peters added.
Licensing and engagement
Netflix has benefited from a recent shift in the streaming landscape, the execs noted: As other heavy-spending streamers change their focus to profit and payoffs, they’ve begun licensing more of their titles to Netflix rather than keeping them exclusive. Notable recent examples on Netflix have included NBC’s (CMCSA) Suits, HBO (WBD) programs including Six Feet Under, and Disney (DIS) TV titles.
“I am thrilled that the studios are more open to licensing again, and I’m thrilled to tell them that we are open for business,” Sarandos said.
Netflix has a “rich history” of helping break some of TV’s biggest hits made by others, he noted, citing Breaking Bad and The Walking Dead, as well as Schitt’s Creek, “because of our recommendation, our reach … because of our distribution heft and our recommendation system, sometimes we can uniquely add more value to the studio’s IP than they can.”
Engagement is going well, Sarandos said. “So we’re really thrilled with our engagement trends domestically and globally. This is really a story about viewing moving from linear television to streaming. The story’s been constant and it continues. “
Engagement is affected somewhat by the company’s password crackdown (paid sharing), but “think about it like fewer households using the same account. So as those folks spin off and get their own accounts and we win them over with our programming that will normalize and continue to grow. “
Overall, despite the company’s expanding breadth, the top priority is still the core business, Peters said.
“We see so much potential and so much opportunity ahead of us in our core business. We’ve got hundreds of millions of qualified households out there that still have yet to sign up for Netflix; I can’t believe it, but they’re there, and we’ve got to win them over.”