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Netflix’s earnings won’t yet show the full impact of the new $6.99 ad-supported subscription

Netflix has estimated it’ll add 4.5 million subscribers in the last quarter of 2022
Where does Netflix go from here?
Where does Netflix go from here?
Photo: Mario Tama / Staff (Reuters)
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As Netflix kicks off 2023’s tech earnings, industry-watchers will be looking for signs of recovery.

The streaming giant started off 2022 recording its first subscribers’ drop in a decade as the highs of the pandemic wore off. When Netflix posts results for the last quarter of that year tomorrow (Jan. 19), it’ll have results to show for some adjustments it’s been making to win back business—specifically, the addition of a $6.99 ad-supported subscription tier.

The full impact of the latest offering won’t be felt immediately, since it was launched in the middle of the quarter, in November, in just 12 markets. And while cooling inflation in the US likely helped boost domestic numbers, the strong US dollar and associated cost of living crises may have had the opposite effect in international markets.

Netflix subscribers, by the digits

9%: New customers who chose the new ad-tier plan in November, making it the least popular of all plans, according to analytics firm Antenna. Netflix has disputed the data’s accuracy

$3.5 billion: Expected additional revenue from ad-tier subscription fees by 2027, on top of $5.5 billion in advertising income, according to London-based market researcher Ampere Analysis

$140 billion: Estimated potential advertising revenue from the 12 global markets where Netflix launched its ad-supported subscription tier

$2.99: The price Netflix is reportedly testing for password sharing. It is yet to announce the final pricing

4.5 million: Paid subscribers Netflix expected to gain in the fourth quarter of 2022, which would be nearly double the 2.4 million added in the third quarter, but just over half of the 8.28 million subscribers added in the fourth quarter of 2021. Analysts are split. At Barclays, Kannan Venkateshwar warned Netflix may add only 2.7 million in the fourth quarter. On the other side of the spectrum, Cowen & Co.’s John Blackledge thinks “the ad tier is attractive for value-conscious consumers,” and expected the service to add 4.7 million subscribers.

Quotable: The promise of Netflix’s ad-tier offering

“Netflix’s ad-supported plan gives the company a way to win back subscribers who left over high subscription prices. It also gives Netflix a path to creating unique accounts for those who have been content to share passwords with friends and family in the past. It’s an exciting time to track these services, with lots of disruption and change.” —Jennifer Kent, VP, Research, Parks Associates.

Charted: All eyes on Netflix’s stock

Is more stock volatility on the cards for Netflix?

Netflix will give guidance on revenue, operating income, operating margin, net income, and earnings per share, but it’s planning to stop reporting on subscriber forecasts starting this quarter. The lack of estimates from the company would make market predictions less reliable and therefore lead to more stock volatility going forward.

Still, the general market sentiment has been improving. “The current price is edging towards the December highs at $330 where buyers are encountering some resistance, but a better-than-expected-result on Thursday is likely to provide the momentum for another bounce higher and edge towards $400,” Capital.com market analyst Daniela Hathorn wrote.

Continue watching: Netflix’s content slate

🇰🇷 Since more than 60% of its users have watched Korean titles, Netflix has planned its “biggest-ever lineup of Korean films and series” with 34 titles in the bank. Between 2016 and 2021, the company invested $700 million into Korean content, and in 2021, it committed another $500 million.

🎥 Its first experiment with live-streaming will be in March with Chris Rock’s comedy special Selective Outrage

🎮 Netflix will expand its cloud gaming offering, and it could even foray into PC gaming 

One ✈️ thing: Netflix is hiring a flight attendant for up to $385,000

Netflix is seeking a Northern California-based flight attendant to serve on a super midsize jet, according to a job listing on its website. In addition to regular duties like pre-flight inspection of all cabin, galley and cockpit emergency equipment, and conducting safety and emergency briefings, the candidate also has to help with stocking the plane and with baggage loading. The candidate must have the “flexibility to work a varied work schedule including domestic and international travel, often requiring weekend and holiday work days and extended travel periods.”

While Netflix doesn’t offer an exact salary in the job description, it says it’ll pay within the overall market range for this role, which is typically between $60,000 and a whopping $385,000.

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