Netflix blew past Wall Street’s expectations by adding a robust 13mn subscribers in the fourth quarter, defying concerns that its crackdown on password sharing could begin to lose steam.
The subscriber figure set a record for the fourth quarter and matched growth levels last seen during the pandemic. Viewers flocked to watch scripted series such as The Crown and unscripted fare such as Beckham, helping to raise the company’s total number of global subscribers by 13 per cent to 260mn.
Netflix said its operating income soared to $1.5bn in the quarter from $550mn a year earlier, thanks to higher revenue and “lower than planned” spending. The streaming pioneer ended the year with 12.5 per cent revenue growth — a strong rebound from 2022 when it experienced subscriber losses that shook investor confidence in the streaming business model.
Netflix struck an optimistic note about the health of its business, marking a sharp contrast with legacy Hollywood studios suffering from steep declines in linear television and heavy streaming losses. “As Netflix has shown, [streaming] can also be a very healthy business,” it said in a letter to shareholders.
Executives said they expected consolidation among the traditional entertainment companies, but added that they did not intend to be buyers. “Our historical bias is to build and not buy,” said Spencer Neumann, chief financial officer, in a video call with analysts. “We’re not interested in some of the big linear assets that may or may not be available.”
The company forecast “healthy double-digit” revenue growth for the full year. “We enter 2024 with good momentum,” it said in the shareholder letter.
Netflix said it planned to build out its advertising business this year and would work to improve the quality of its film and series offerings. Greg Peters, co-chief executive, also said he expected to see continued benefits from the initiative to discourage password sharing. “We’re going to continue to improve that engine and that will improve our growth for years ahead, not just in 2024,” he said.
The company largely halted price rises as it rolled out the password sharing crackdown last year, but Peters said Netflix would resume increases this year.
Earlier on Tuesday Netflix said it had struck a 10-year, $5bn deal with World Wrestling Entertainment, a move that will push it further into the live streaming market. The deal increased speculation that Netflix was laying the groundwork to enter the market for streaming live sports as Amazon, Apple and others have done.
Ted Sarandos, co-chief executive, shot those suggestions down. WWE’s scripted “sports entertainment” content fitted with Netflix’s business, he said, but the company was not interested in bidding for conventional sports rights.
“I would not look at [the WWE deal] as a signal to any other change in our sports strategy,” he said.