Industry Insider: Re-discover Streaming with Netflix’s Q3 Earnings Call
Netflix
On October 18th, Netflix had its third quarter earnings call, which featured statements carried out by both CEOs; Ted Sarandos and Greg Peters, who accompanied CFO; Spencer Neumann. With Netflix’s pioneering status and ability to consistently maintain its elite capital within the streaming world, there will always be an interest in looking to their next objectives. Netflix remains at the helm as the streaming juggernaut, as Sarandos reports that that Netflix series holds the #1 spot for 37/38 weeks in the rankings for all streaming series. A similar story rings true for the rankings of Netflix films as well, 31/38 weeks, to be exact.
As the call begins with questions pertaining to the finalization of negotiations to the WGA contract demands, Ted Sarandos comments on the pending developments for the SAG-AFTRA strike. He prioritizes these statements in the guise of sustaining the rollout of content to keep consumers engaged with their programming. Here, he highlights projects expected to be released in the upcoming quarter: Money Heist: Berlin, Rebel Moon, Maestro, and Chicken Run 2, Season 7 of Big Mouth.
Starting this interview-style call with confidence Ted continues to speak on engagement as he stands firm in assessments made based on the viewing experience. This method is seemingly a response to the conversational aspects of streaming as an industry.
“...of our reason for not publishing early was part of our promise with creators. At the time we started creating original program, our creators felt like they were pretty trapped in this kind of overnight ratings world and weekend box office world defining their success and failures.”
So there is an idea of genuine need for transparency as it is true to the core of Netflix’s initial business model in terms of their original content. However, this transparency and partnership-like relationship between subscriber and corporation may have modern limitations with the introduction of advertisements and password sharing crackdowns. Over the recent months, Netflix's controversial additions to their platform have shaken consumers with these changes. Greg Peters assures that Netflix is simply allowing for a more diverse consumer integration, as they have found a thirty percent increase in sign-ups since introducing the plan that implements advertisements. With the help of these numbers to keep the advertisers satisfied, the corporation has also begun a relationship with Nielsen to keep track of their US audience metrics. With the great resentment of the password crackdown, Neumann claims that they are working on a solution for account sharing. He doesn’t present the details in this call but measures the number of connected households for their subscribers to be around 0.5 billion. In the meantime, Netflix insists that the option of zero ads lower cost is an acceptable alternative until these solutions can be presented.
As covered previously, there may soon come a hotspot within consumer spaces to debate the program models of subscription vs non-subscription as ads become more common. However, Netflix has an anticipated growth margin that will keep in line with the traditional 40-50 traditional networks; at least the corporation believes this competition to be equivalent on an international basis. This is backed by the increase in the allocated budget for content expenditures from this year’s $13 billion to 2024’s $17 billion. The fan praised One Piece live action adaptation based on the anime and manga emphasizes this financial success further. Such an accomplishment is held in the highest regard by the Netflix team, as this series reached #1 in 84 countries. As noted by Ted Sarandos, Stranger Things wasn’t even able to compete as heavily when it came to this level of achievement.
Netflix will see limitations moving forward, at least in the financial sector due to the ongoing strike with SAG. Spencer Neumann shares this prediction by stating:
“The biggest swing factor is going to be when the SAG-AFTRA strike resolves. And so that'll get us to a cash to P&L ratio kind of closer to 1:1.1x. And so we're not putting a specific number out there for free cash flow in '24.”
Yet, the corporation also upholds a targeted agenda for its ideal cash flow. This exhilaration of amplifying the cash flow and the conviction to do so derives from the recent $2.5 million buy back in Q3. Therefore, 2024 is expected to have an estimated $6 million in cash flow as that should reflect two months worth of revenue. With that, Netflix’s leaders aren’t wary of the corporation's future and see a light at the end of the tunnel with brighter and bigger opportunities ahead for the business and consumers. The health of each component of the Netflix core is codependent on one another, which creates a self contained ecosystem of constant streaming evolution.
