Audiences Liked Netflix More Than Wall Street

Author

Michael Beach
January 27, 2022

2022-01-26_17-18-09

Big news: Netflix spooked Wall Street with lower-than-expected subscriber growth numbers.  The stock got hammered and has fallen ≈ 45% (↓ ≈ $160B in market cap) from a high of ≈ $700/share in mid-November.

Netflix subscribers (YoY growth):
1) 2007 – 7.5M
2) 2008 – 9.4M (↑ 26%)
3) 2009 – 12.3M (↑ 31%)
4) 2010 – 20.0M (↑ 63%)
5) 2011 – 23.5M (↑ 18%)
6) 2012 – 33.3M (↑ 41%)
7) 2013 – 44.4M (↑ 33%)
8) 2014 – 57.4M (↑ 29%) 
9) 2015 – 74.8M (↑ 30%)
10) 2016 – 93.8M (↑ 25%)
11) 2017 – 110.6M (↑ 18%)
12) 2018 – 139.3M (↑ 26%)
13) 2019 – 167.1M (↑ 20%)
14) 2020 – 203.7M (↑ 22%)
15) 2021 – 221.8M (↑ 9%)

Netflix subscribers (% of total):
1) International – 146.6M (66%)
2) U.S./Canada – 75.2M (34%)
3) Total – 221.8M

Estimated U.S. content spend for Netflix (YoY growth) according to Wells Fargo:
1) 2019 – $14.6B
2) 2020 – $12.5B (↓ 14%)
3) 2021 – $17.1B (↑ 37%)
4) 2022P – $19.3B (↑ 13%)
5) 2023P – $20.3B (↑ 5%)
6) 2024P – $21.0B (↑ 3%)
7) 2025P – $21.3B (↑ 1%)

Why this matters: Netflix grew content spend faster than subscribers during 2021. Increasing revenue could include price increases, sponsorships, and advertising.

YoY increase for Netflix between 2020-21:
1) Subscribers  – ↑ 9%
2) Content spend – ↑ 37%

Mr. Screens’ Crystal Ball: Wall Street will treat Netflix like a technology company as long as it grows like one.  Once the growth story is over, Wall Street will treat Netflix like a media company that needs to maximize future cash flows.

Netflix January 2022 price increase (% change) according to Hollywood Reporter:
1) Basic – $8.99 → $9.99 (↑ 11%)
2) Standard – $13.99 → $15.49 (↑ 11%)
3) Premium – $17.99 → $19.99 (↑ 11%)

Outstanding questions:
1) If Netflix has growth problems while dominating viewership for streaming content (see above), what does that mean for everyone else?

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