Davos: how to achieve the century of Africa?

SAN FRANCISCO: Netflix now has 230.75 million paid subscribers, significantly exceeding its forecast and market expectations for the last quarter, and turning the page on a very difficult 2022 for the streaming service.

The platform gained 7.66 million new subscribers between October and December, much more than expected, according to its earnings release released on Thursday.

It also announced that its founder Reed Hastings was giving up his place as co-CEO to Greg Peters, alongside Ted Sarandos.

“I’m so proud of our first 25 years, and so excited for the next 25,” said Reed Hastings, who originally started a DVD rental service by mail. He will remain with the company as “executive chairman”.

Netflix went through a rough patch last year. The service had lost nearly 1.2 million subscribers in the first half.

It had started to seduce millions again in the third quarter, and benefited at the end of the year from new seasons of successful series such as “The Crown”, on Queen Elizabeth II, and “Emily in Paris”.

New programs, including the phenomenon series “Wednesday” and the documentary series “Harry & Meghan”, where Harry and his wife tell how they decided to abandon the British monarchy, have also contributed significantly to the popularity of the service.

But Netflix remains “under great pressure to rectify the trajectory and achieve better results for its shareholders”, notes Paul Verna, analyst at Insider intelligence, after “its title lost more than 50% of its value in 2022”.

In the fourth quarter, the Californian company achieved 7.85 billion dollars in turnover, but generated only 55 million in net profit, well below the 257 million expected by the market.

Turning
Netflix took steps last year to generate new revenue streams, which should pay off this year.

In particular, the platform launched a new cheaper subscription in November, with advertising – a less prestigious solution that it had long refused.

“It’s the beginning of a turning point for the company,” said Mr. Verna. “We expect a relatively soft start, with advertising revenue of $830 million in 2023.”

“For Netflix, like other streaming companies, faces stiff competition, economic headwinds and an urgent need to focus on profitability rather than subscription growth,” he explained. .

The group also plans to tighten the screw on the side of the sharing of identifiers and passwords, which allow many people to access the content of the platform without paying.

The new regulations must be deployed during the current quarter. It will require users to pay to add profiles to their account.

“Based on our testing in Latin America, we expect terminations that will affect subscriber growth in the near term,” Netflix said in a statement.

The service nevertheless thinks that this will convince consumers to subscribe to their own subscription, and therefore “advance” its income.

On Wall Street Thursday, the year-end subscriber growth and management change were well received. The title of the platform took 6.29% during electronic trading after the close of trading.

The half-departure of Reed Hastings, however, constitutes “a significant psychological change for Netflix”, considers Neil Saunders, analyst at GlobalData, who fears that the service will become less daring.

“As he remains chairman, the company retains its expertise, but there is a small risk that the culture of the company will change and become more cautious, especially in this context of economic uncertainty,” he detailed.

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Davos: how to achieve the century of Africa?


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