Business model

Investors await Netflix revenue while scrutinizing streaming business model


By Brian Stelter, CNN Business

A version of this article first appeared in the “Reliable Sources” newsletter. You can register for free here.

Netflix will release its first quarter results on Tuesday afternoon, setting the bar for a season of financial reporting that will reveal a lot about the state of streaming.

The king of streaming disappointed investors earlier this year with dim prospects for future subscriber growth. “Conventional wisdom seems to have changed overnight,” and not just about Netflix, Puck’s William D. Cohan wrote after the final season’s results. The Point: There’s “a lot of commotion on Wall Street these days over the economics of video streaming.”

Brian Wieser, global president of business intelligence at GroupM, called it a “reset” in an interview with The Guardian. In part, he said, it’s “an acknowledgment that the economics of the streaming business aren’t as good as those of the traditional media business.” But he also said that Netflix remains “one of the most valuable media companies on Earth”, which no one would dispute. So… how was the first trimester?

Can Netflix pull a rabbit out of its hat?

Netflix shares are down 44% year-to-date, THR’s Georg Szalai wrote on Monday, “and few on Wall Street expect the giant’s subscriber and earnings report streaming on Tuesday turns the currently gloomy mood among investors on its head.”

As Wall Street focuses “on increasing spending on original content amid intense competition in the streaming space,” he wrote, “Netflix seems to need to pull a rabbit out of its hat in part of its latest earnings report to change the mood in a big way. It is more likely, however, that management will continue to emphasize the theme of continuous growth.

>> Russia’s invasion of Ukraine will likely come up on Netflix’s earnings call, as the company has suspended service in Russia, impacting its total subscriber count…

>> I’ll listen to the call for advice on Netflix’s experiences with password sharing billing in Chile, Costa Rica, and Peru…

The inflation factor

This new report from media consultancy Kantar concerns the UK, but could easily be applied to other countries: soaring inflation “has forced many households to cut back on non-essential spending, and Subscriptions to video streaming platforms are firmly in sight,” Anna Cooban wrote for CNN Business. According to Kantar, “Britons canceled around 1.5 million subscriptions in the first three months of 2022, up by around 500,000 from the previous quarter. More than a third did so to save money. the money…”

Lowry’s Insight

Brian Lowry writes: “Netflix won’t show up on its earnings day with the Best Picture Oscar the service has long coveted, but it has clearly made enough inroads in this competition to justify the strategy. Still, the question is whether in how busy Netflix has been pursuing what amounts to token victories without adequately responding to pressures on its business model, especially as studios funnel content to their own streaming services, forcing Netflix to spend more on develop content and launch a wider network in terms of acquisition around the world.The irony is that Netflix’s cultural footprint has never felt bigger – from launching surprise hits like “Squid Game” to under-the-radar broadcasts that erupt and strain – increasing the possibility that the service could win many battles and end up losing the war…”

“Binge Times” comes out on Tuesday

Perfect Timing: On Tuesday, Deadline’s Dade Hayes and Reuters’ Dawn Chmielewski release a new book called “Binge Times: Inside Hollywood’s Furious Billion-Dollar Battle to Take Down Netflix.” The book “breaks down the utter chaos of the streaming wars in a way that even a casual industry watcher can stomach,” reviewer Michael Malone wrote. “It’s a well-researched piece of work that makes for compelling reading.” Deadline and Lit Hub published excerpts…

To know more…

— Is this Netflix’s new way of developing content, combining games and shows? “Netflix is ​​doubling down on games with the upcoming launch of Exploding Kittens mobile game and cartoon series…” (VentureBeat)

— Latest from Gerry Smith: “Jon Stewart struggles add to list of streaming talk show failures…” (Bloomberg)

— After a two-year ban due to Covid, character hugs are back at Disneyland. Brooks Barnes went to Anaheim to document the moment… (NYT)

— “Paramount Global has agreed to pay $14.75 million to shareholders of the former CBS company in a class action lawsuit alleging that the company’s failure to disclose allegations of sexual misconduct against former CBS chief executive Leslie Moonves artificially inflated the value of his stock…” (Reuters)

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