Adding subscribers has been Netflix’s bread and butter for measuring the streamer’s success for as long as it’s been around. But as the company continues to grow, Netflix’s leadership indicated on Tuesday it’s no longer the only metric they want Wall Street and the industry at large to evaluate them on moving forward.
After seeing some positive subscriber growth in Q3 and forecasting an even greater result for Q4 2022, Netflix announced in its letter to shareholders Tuesday that it would no longer provide guidance on the streamer’s paid membership in future quarters. This quarter they predicted that Netflix will add another 4.5 million subscribers in Q4 for 2022, but those internal forecasts on paid net adds specifically will end after this quarter.
It’s a “pretty minor change,” as Spencer Wang, Netflix’s VP Finance, IR and Corporate Development, mentioned on Tuesday’s earnings interview. That’s because the streamer will still give shareholders and analysts guidance on everything else, including revenue, operating income, diluted earnings per share and operating margin, and it will even continue to report global and regional paid subscribers.
But as Wang explained, a single subscriber shouldn’t just be compared apples to apples, especially if you’re comparing it to other streaming services. And it’s why Netflix wants you to consider its revenue, which for Q3 beat Wall Street expectations and hit $7.9 billion, as the main metric for its success.
“Focusing on subscribers in our early days was helpful, but now that we have such a wide range of price points, different partnerships all over the world, economic impact of any given subscriber can be quite different,” Wang said. “That’s particularly true if you’re trying to compare our business with other streaming services. So that’s why we’ve been increasingly focused on revenue as our primary, top line metric.”
Netflix is also developing some new revenue streams heading into 2023, including the ad-supported pricing tier that will launch next month, as well as some solutions to curb password sharing that will roll out early in 2023, and it means that “membership is only one aspect of the revenue picture.”
It will be up to Wall Street if they agree with that notion, and Netflix’s stock price has already surged 14% in after hours trading based on those optimistic forecasts for Q4.