With high inflation and ever-increasing competition, Netflix struggled in 2022. But by the end of the year, the streaming pioneer was back on track with strong growth.
The era of company founder Reed Hastings is coming to an end at the streaming giant Netflix. After more than two decades, the 62-year-old retired from top management. The move followed a surprisingly strong final quarter.
Not least thanks to the documentary series “Harry
“Even founders need to evolve!” Hastings wrote on the company blog on Thursday. In 2020, he had promoted the long-time head of content Ted Sarandos to a dual leadership. Greg Peters, who was previously responsible for day-to-day business, is now becoming co-boss. “To be honest, the two of them have run the company more and more,” Hastings said in an interview. As Executive Chairman of the Board of Directors, he should continue to have great influence.
Netflix’s first business model was DVD rentals by mail. However, Hastings recognized the potential of streaming early on and bet on it. The next strategic step was to produce your own content: on the one hand, to save on license costs. On the other hand, because Hastings predicted that studios would keep their programs for their own services in the streaming boom. At the same time, he blocked advertising on the service, tolerated the sharing of passwords and stayed strictly away from expensive sports rights. Netflix is breaking with the first two principles.
If passwords are shared, there will be a surcharge in the future
The introduction of the cheaper subscription with advertising in November, including in Germany, was a reaction to increasing competition from more and more streaming services. Even the big rival Disney now has a version with ads. Peters emphasized that the advertising subscription has so far mainly attracted new customers, and that there is little change from more expensive tariffs.
If Netflix finds that passwords are being shared across a household, the service plans to charge a surcharge in the future. “It’s not going to be a universally popular move,” admitted Peters. Be prepared that some users will leave Netflix, at least temporarily. At the same time, the service is preparing for additional sales through the step. And Sarandos hopes above all that the program will be attractive: “If the content works, the business will work.”
After the past year had been disappointing for Netflix for long stretches, the conclusion turned out to be much better than expected. In the three months to the end of December, the streaming service gained a total of 7.66 million new customers – instead of the expected 4.5 million. Overall, Netflix had 230.75 million user accounts by the end of the year. Next to “Harry
“2022 was a difficult year with a bumpy start, but a brighter finish,” said the annual report, looking at the weak first half of the year. Netflix experienced a customer rush at the beginning of the pandemic, but then got into trouble with intermittent customer dwindling. In addition to the competition from financially strong rivals such as Disney and Amazon, customers’ money was no longer so easy due to inflation. Now things are going better again: In the fourth quarter, revenues grew by around two percent year-on-year to $7.9 billion (7.3 billion euros).
Although net profit collapsed from $607 million to $55 million due to unfavorable exchange rate developments, Netflix announced an increase to $1.3 billion for the current quarter. The company expects sales to grow to $8.2 billion. Overall, the quarterly report was well above the forecasts of Wall Street experts. Netflix shares started premarket trading with a strong plus.