Investors on a knife edge as Netflix prepares to reveal Q4 results

Wednesday

All eyes will be on Netflix’s fourth quarter 2022 results when they are released at 1500 PT today. But new research from Kantar has provided a sneak preview of what to expect.

On the plus side, Kantar has confirmed that Tim Burton-directed Wednesday has been a soaraway success, directly responsible for adding 7% of the company’s new subscribers in the US. Less welcome for the streaming giant is Kantar’s claim that its new AVOD service, Basic with Ads, has had “a slow start” since its November debut.

According to Kantar: “This ad-based offer aims to reduce the high churn Netflix has faced over the last year, win new subscribers, and win back lost subscribers. So far, Netflix is not seeing the expected results. In the last quarter of the year, Netflix’s subscriber base continued to decline. Netflix Basic with Ads now accounts for 12% of its subscriber base, but the savings of $3 a month was not enough to win new subscribers. 11% of Netflix subscribers in Q3 traded down to Netflix AVOD in Q4; and of all new AVOD subscriptions in the quarter, only 2% went to Netflix.”

According to Kantar, trading down accounted for nearly all Netflix AVOD subscriptions in its first two months. But it goes on to say that “Netflix subscribers who traded down to AVOD tend to be less satisfied with the service. The amount of original content, variety of content, and quality of the content are sticking points with Netflix AVOD subscribers, pointing to higher churn rates in the future.”

2022 was a torrid year for Netflix, which saw its share price slump in April, when investors become rattled about its future prospects. The share price has recovered a lot of ground since then but is still far short of its level in early 2022. When the company’s results are released tonight, investors will be hoping to see subscriber growth internationally and some progress on controlling content costs. But with the current economic climate forcing people to make cutbacks and inflation pushing up the price of content, it’s difficult to predict which way the results will go. If the platform’s results don’t satisfy investors, there are likely to stock market ripple effects for the company and its big spending streaming competitors.

Kantar also said: “Among new services used in Q4’22, Amazon Prime Video, Peacock, and Paramount+ had the largest gains. Yellowstone (purchased episodically on Prime Video or streamed on Peacock), House of the Dragon on HBO Max, and Wednesday on Netflix were the three most enjoyed titles in Q4’22.”