Latest News

MarketWatch First Take: As Netflix growth slows, streaming pioneer plans to open up its viewer metrics

The days of astounding double-digit revenue growth and subscriber growth at Netflix Inc. are likely a thing of a past, so executives are promising to offer a different metric for investors to examine.

That shift was in full view on Tuesday, when Netflix

reported third-quarter revenue growth of 16.3% to $7.5 billion, compared with growth of 28% and 31% in the third quarters of 2020 and 2019, respectively. Its forecast was also lighter than what some on Wall Street were expecting for the fourth quarter, when a glut of new content that was delayed by pandemic production shutdowns is expected to arrive on the streaming service.

Subscriber growth is slowing even more rapidly, with 4.4 million new paid subscribers in the third quarter. For the year, Netflix is expecting approximately 18.26 million new subscribers, based on its estimates of 8.4 million adds for the fourth quarter, a sharp drop from the36.5 million new subscribers Netflix experienced during 2020.

“The big picture is, no one’s really sure,” Netflix co-CEO Reed Hastings said in the company’s analyst Q&A, after company executives were asked about its subscriber growth rate. “You can’t come off the craziness of COVID and be confident of the next two years. So we’re going to push really hard.”

Company executives said their goal was to try and return to average subscriber growth of around 27 million a year, the average of where it has been in the last few years, but sounded doubtful about being able to forecast accurately.

“I think we’re all wrestling with post-COVID, how do things come back together?” Hastings added.

As it is dealing with a slowing growth rate, the company is offering investors another way to look at its viewership. In its quarterly investor letter, Netflix executives said they planned to disclose later this year the hours viewed for its titles, instead of the number of accounts that watched an least two minutes of them.

Although the analyst conducting the Q&A on Netflix’s earnings “call” did not ask any questions on the topic, Netflix said in its investor letter that it believes that “engagement as measured by hours viewed is a slightly better indicator of the overall success of our titles and member satisfaction.”

This move may also seek to counter information being leaked to investors and the press. Last week, Netflix fired an employee for sharing confidential information with Bloomberg News that included internal metrics on “The Closer,” the controversial stand-up comedy special from Dave Chappelle. Some Netflix employees have voiced their concerns that the show is transphobic and harmful to transgender people, and are planning a walkout on Wednesday.

With or without these new metrics, investors will still be focused on subscriber growth, as they have been for years. The company seems to be trying to tell investors to look for other ways to measure its performance, as it continues to make huge strides as a streaming content provider and creator.

Subscriber churn and viewership metrics may become the more important pieces of data for investors to measure the real staying power of Netflix in the future. But for right now, Netflix will have to reassure shareholders that slowing growth does not mean that its valuation needs to come down too.

What's your reaction?

In Love
Not Sure

You may also like

Leave a reply

Your email address will not be published. Required fields are marked *

More in:Latest News