Netflix acquired 13.1 million subscriptions in the final quarter of 2023, marking its most significant growth since the pandemic’s onset and surpassing estimates of 8.97 million subscribers, as reported by Reuters. The surge in sign-ups at the end of the year was attributed to customers, motivated by the company’s efforts to curb password-sharing, creating individual accounts.
The streaming platform’s stock surged by 10% on Wednesday, bolstering investor confidence, driven by substantial subscriber growth.
“Netflix has already won the streaming wars and this type of strong result/guidance, especially relative to its streaming peers, is what winning looks like,” Pivotal Research Group analyst Jeffrey Wlodarczak was quoted as saying by Reuters.
According to Reuters, some analysts believe that the valuation of Netflix is justifiable, considering the increasing focus on profitability by other streaming companies. This trend is expected to compel these companies to license more content to Netflix, potentially boosting subscriber growth and average revenue per user.
Compared to its competitors, Netflix’s stock holds a premium position, trading at nearly 30 times its 12-month forward earnings, contrasting with Walt Disney Co’s 20.41, as per LSEG data.
A BBC report said that the irony in Netflix’s gains, given its historical reluctance to sell ads. For years, the company resisted such calls, citing concerns about compromising viewer experience and complicating its business due to privacy risks and other issues.
However, the company faced a drop in subscribers in the initial half of 2022, coupled with a decline in profits. This compelled the company to explore innovative strategies to attract new viewers and generate additional revenue.
“We largely put price increases on hold as we rolled out paid sharing. Now that we’re through that, we’re able to resume our standard approach,” BBC quoted co-chief executive Greg Peters as saying.
Many opted for company’s cheapest plan
The BBC report further said that many new Netflix members chose the platform’s most affordable plan, showing no reluctance even though it includes advertisements.
Netflix revealed that in the 12 countries where it introduces ads, including major markets like the UK and the US, this particular plan constituted 40% of the new subscriptions.
The gains represent an ironic turn of events for a company that staunchly opposed ad sales for an extended period, citing potential negative impacts on viewer experience and complications for its business due to privacy risks and other concerns.
The company intends to allocate up to $17 billion for content this year, prompted by disruptions caused by dual Hollywood strikes in the previous year involving actors and writers.
Additionally, there is an increased focus on live programming, demonstrated by a recent announcement of a rights deal exceeding $5 billion. This deal, unveiled on Tuesday, aims to secure exclusive rights to World Wrestling Entertainment’s “Raw” and other content for their platform starting January 2025.