On Thursday, January 20, 2019, after the U.S. stock market, the largest video streaming giant in the United States and even the world, Netflix (NFLX), announced its fiscal fourth quarter 2021 financial report, although earnings per share exceeded expectations, and fourth-quarter revenue of $7.71 billion was also in line with expectations, but it is expected that the number of streaming paying users in the first quarter will increase by 2.5 million, significantly lower than analysts' expectations of an increase of 6.26 million, and Netflix's U.S. stocks will expand from 4.77% to 19.92%.
Specifically:
The EPS for the fourth quarter was $1.33 and analysts expected $0.81, up 16% year-over-year. Fourth-quarter revenue of $7.71 billion was in line with analysts' expectations; operating margin was 8 percent, down 6 percent from the year-ago quarter. The number of paid net streaming subscribers increased by 8.28 million in the fourth quarter, and analysts expect an increase of 8.13 million. The number of paying streaming subscribers in the fourth quarter reached 221.8 million, with analysts expecting 221.6 million.
At the same time, Netflix also announced its performance guidance for the first quarter of 2022, which includes:
EpS is expected to be $2.86 in the first quarter and analysts expect $3.37. Revenue is expected to be $7.90 billion in the first quarter, and analysts expect $8.12 billion. The number of paying streaming subscribers is expected to increase by 2.5 million in the first quarter, and analysts expect an increase of 6.26 million. At present, the full-year operating margin target is set at 19%-20%.
Streaming business growth is weak, and Q1 expects paying subscriber growth to be less than half of analysts' estimates
Previously, Netflix's guidance for increasing subscribers in the fourth quarter was 8.5 million, with a net addition of 8.5 million users, which would return the company to the pre-COVID-19 quarterly growth range of about 8 million to 8.8 million.
Earnings data released today shows that the number of paid net streaming users increased by 8.28 million in the fourth quarter, lower than previously expected. The forecast for a 2.5 million increase in the number of paying streaming users in the first quarter is far below analysts' expectations of 6.26 million.
Neither the "sluggishness" nor the "slowdown" in growth seem to be enough to summarize Netflix's disappointing performance expectations for the next quarter. According to the financial report, the total net increase in Netflix's payment for the whole year of 2021 is 18 million, and in 2020, it is 37 million:
- UCAN added 1.2 million paid memberships in the fourth quarter of 2021 (up from 900,000 last year), making it the region's strongest growth quarter;
- More than 90% of the net increase in payments in 2021 will come from abroad;
- The number of paid members in the Asia-Pacific region increased by 2.6 million in 2021 (compared to 2 million in the same period last year), with strong growth in Japan and India;
- The largest contributor to the net increase in paid in the fourth quarter was 3.5 million in the Emporium (4.5 million in the year-ago quarter).
At present, the most fierce competition for users is the US market. According to leichtman Research, a research firm, the number of U.S. households subscribed to streaming services reached 78 percent. Deloitte also estimates that the U.S. liquidity rate (i.e., the rate at which people abandon or subscribe to services) averages 35 percent, which is relatively high.
Netflix said increased competition from other companies is a reason for the slowdown, though it has said in the past that companies such as Apple and Disney will not have a substantial impact on growth.
Consumers always have plenty of options when it comes to their entertainment time — and that competition is only going to get tougher as entertainment companies around the world develop their own streaming products.
While this additional competition may have some impact on our marginal growth, we continue to grow in every country and region where these new streaming alternatives are launched.
The growth rate of paid users is not good, and the price increase is made up
Since hitting a record high on Nov. 11, Netflix's stock price has been under pressure. Investors worry that increasing competition and lower user growth will hurt their profit margins. In response to sluggish growth following strong user growth recorded during the pandemic, the company last week raised the price of monthly subscription packages in North America (U.S., Canada), which accounted for 44 percent of total revenue.
In January, Netflix's website data showed that the basic account fee in the United States rose from $8.99 per month to $9.99, the standard account fee rose from $13.99 to $15.49 per month, and the premium account fee rose from $17.99 to $19.99 per month. Standard account fees in Canada rose from $14.99 CAD to C$16.49, premium account fees rose C$2 to C$20.99, and basic account fees remained unchanged at $9.99 CAD.
Netflix also mentioned in its earnings report that it lowered the pricing of its plans in India last December, because the uniqueness of the Indian market has led to very low pay TV pricing.
We believe that these new prices will make Netflix more accessible to more people, thus enhancing our sense of value. Our goal is to maximize long-term revenue in each market.
Although the price increase is something consumers don't want to see, at least Wall Street is cheering, and Netflix's stock price briefly rose at the time of this price.
The strongest content supply season ever, with record-breaking original and exclusive content coming online
According to Wedbush Securities, Netflix released 157 movies, new episodes and new seasons of existing episodes that season. That's a 20 percent increase in the number of original content released in the same period last year.
Netflix's fiscal fourth quarter featured "Red Notice" and "Don't Look Up," which saw the highest number of views in the platform's history. But for Netflix, giving viewers what they want may not be enough to attract millions of new users.
According to Netflix's earnings report, in the fourth quarter, it released a new season of return programs, such as "The Witcher" (484 million hours of views), "You" (468 million hours of broadcasting), "Emily in Paris" (468 million hours of broadcasting) and so on. Among them, "Squid Game", which was released in the third quarter, was a great success in the fourth quarter, and the cumulative viewing time in the first four weeks of release reached 1.65 billion hours. At the same time, Netflix also launched another Korean drama adapted from South Korea's "The Great Robbery of Money".
Media analyst Michael Nathanson previously said in a research report that high-quality content cannot be guaranteed by user increments and duration, and he believes that Netflix's next growth point will come from the Asia-Pacific region.
2022 should prove that no company has a monopoly on high-quality content, and the time spent on any video-on-demand platform is not guaranteed.
London-based research firm Ampere Analysis expects spending across the streaming industry to total more than $230 billion this year, led by huge spending on sports rights by companies such as NBCUniversal parent comcast comcast and Disney at $22.7 billion and $33 billion, respectively.
Netflix spends about $17 billion on shows in 2021, but didn't disclose 2022 spending. Some analysts expect Netflix to spend more than $17 billion on content this year, up 25 percent from 2021 and 57 percent from $10.8 billion in 2020.
Meanwhile, Netflix said it expects more back-end weighted content in the first quarter, with a big premiere taking place in March.
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