Netflix Seeks Higher Revenues by Reaching More Subscribers Despite Ongoing Economic Downturn

Netflix reported its fourth-quarter earnings on Jan. 19 showing growth in subscribers.

Following the results, the company’s stock increased by almost 6% on Jan. 20, reaching $334.33.

The latest earnings report from the streaming juggernaut, released on Jan. 19, shows that the company added 7.66 million subscribers in the most recent quarter, far exceeding the expectations of 4.57 million.

Additionally, the company said that co-CEO Reed Hastings would leave his position to take the executive chairman position at Netflix. Greg Peters, the COO, has been named co-CEO alongside Ted Sarandos.

The above-expectations growth in subscribers comes after the company saw a tumultuous 2022, with dwindling subscribers following an increase in subscription prices, and amid a current period of an overall economic downturn in the tech industry.

A report by J.P. Morgan shows that 2022 was a bumpy year for Big tech companies. According to the report, Big Tech companies lost a combined market value of about $2.5 trillion as a result of macroeconomic headwinds, global supply chain issues, and declining revenues after experiencing steady growth for more than a decade and a pandemic-induced boom.

In Netflix’s earnings report interview, new co-CEOs Greg Peters and Ted Sarandos expressed optimism for the future of Netflix.

Their answer to the question posed by Jessica Ehrlich, an analyst from Bank of America Merrill Lynch “What is your view of the next five-plus years? Do you need to get bigger? Stay the course?” showed that they both see a focus on subscribers as the primary driver of revenue for the company.

They envision a steady growth in revenue, as well as an expansion of the platform’s scope of content to provide even more diverse options for its customers.

Sarandos attributed Netflix's growth to the company’s focus on consumers.

“I think being able to focus on consumers first and -- has really been our biggest benefit.”

- Ted Sarandos

Sarandos added that he expects “an enormous amount of growth ahead,” even in markets where Netflix is very well established, noting that “in the U.S., we're about 8% of TV time still.”

Regarding the company’s expansion plans, Peters said he associated growth with gaining more members around the world.

“I think that that translates into being bigger. And I think that means being bigger in terms of touching more members around the world, delivering them incredible entertainment. We'll see that in terms of being bigger, in terms of the amount of engagement that we can drive, the amount of hours that we're satisfying them.

Be bigger in terms of the culture impact, too. I mean, you've seen, you know, I mean, just incredible cultural impact in terms of "Wednesday," "Stranger Things." The ramifications that these shows have in terms of the popular culture are significant, and that's going to get bigger, too. Also, it means bigger in terms of revenue and profit streams. So, we're looking forward to those as well.”

- Greg Peters

Netflix recently launched an advertising platform last two months, and with the launch of its ad-supported plan on November 3, Netflix experienced its highest daily subscription sign-up rate in the United States since the pandemic began in April 2020 after experiencing its first-ever subscriber loss in the first quarter of 2022.**