Netflix’s gains 13M new global 4Q subscribers as it unwraps its best-ever holiday season results

 (AP) — Netflix registered its third-consecutive quarter of accelerating subscriber growth in the final three months of 2023, closing out a comeback year that included a crackdown on viewers freeloading on the video-streaming service and a smattering of price hikes.

The fourth-quarter results announced Tuesday provided further evidence that Netflix was able to come up with a formula that produced a spike in subscribers even as it became more expensive to watch its lineup of TV shows and movies.

Netflix signaled it will try to justify the higher subscription prices — and perhaps reel in more advertisers to a low-cost plan that includes commercials — with a $10 billion deal announced Tuesday that will bring the popular wrestling program, WWE’s “Raw,” to its service.

That weekly show, set to move to Netflix next year, will supplement a smorgasbord of TV shows that include the likes of the Emmy-award-winning black comedy “Beef” and the Oscar-nominated film, “Maestro.”

13.1 million worldwide subscribers during the October-December period, well above analyst projections, according to FactSet Research. The holiday season gains — the biggest Netflix has ever posted in the fourth quarter — exceeded the 8.8 million additional subscribers that Netflix posted in the July-September period, which in turn jumped above the numbers recorded in the quarter starting the year.

The rising tide of customers left Netflix with more than 260 million global subscribers at the end of 2023 — an annual increase of nearly 30 million subscribers. Last year’s performance was a stark contrast to 2022’s increase of 8.9 million subscribers — a lackluster showing that raised questions about whether the video-streaming pioneer was losing steam amid stiffening competition for viewers.

But Netflix managed to bounce back, primarily through the rollout of a low-priced streaming plan that injected commercials into its service for the first time, combined with an effort to block viewers who had been accessing the service for free by using the passwords of paying customers.

At the same time, Netflix tightened its programming budget while also increasing the price of its top-tier streaming plan by 10% to help appease investors seeking higher profits. That paid off in the latest quarter, which saw Netflix earn $937.8 million, or $2.11 per share, up from net income of $55.3 million, or 12 cents per share, the same time in the previous year. Revenue climbed 13% from the prior year to $8.83 billion.

The revenue exceeded analysts’ forecasts, while earnings per share missed analyst targets, partly because of a $239 million charge tied to its foreign debt.

Netflix’s strategy has been a hit with Wall Street, reflected in a 65% increase in its stock price last year while shares of other media giants such as Walt Disney Co. and Warner Bros. Discovery have struggled to prove they can make money from their video-streaming services. The company’s shares rose more than 8% in Tuesday’s extended trading after its fourth-quarter numbers came out.

Netflix “is ahead of peers with new revenue streams, and no one can compete with its technology platform, programming, and global distribution,” CFRA Research analyst Kenneth Leon wrote in a recent assessment of the streaming and cable TV landscape.

The challenge facing Netflix now is coming up with ways to sustain last year’s momentum, with the “Raw” deal making it seem like live programming is now being eyed by the company as fertile ground.

“If we continue to execute well and drive continuous improvement — with a better slate, easier discovery, and more fandom — while establishing ourselves in new areas like advertising and games, we believe we have a lot more room to grow,” Netflix management wrote in a Tuesday letter to shareholders accompanying its fourth-quarter review.

In a conference call with analysts, Netflix co-CEO Greg Peters predicted it will be several years before ad sales bring in significant revenue. But the company is still benefiting from the $7-per-month price for the plan with commercials, with that option now accounting for about 40% of its new subscribers in the markets where it’s available.

Peters told analysts that Netflix remains confident that it can still convince more viewers now using the passwords of paying customers to ante up for their own plans. “That (crackdown) will improve our growth for years,” Peter said.

Analysts have also been anticipating the company will amplify a push into video games that Netflix embarked upon in 2021 during the throes of the pandemic.

While emphasizing the video game segment remains relatively small, Netflix says it’s starting to see more subscribers spending more time on its service engaged in that pastime instead of watching TV series and films.

WWE’s weekly television show “Raw” will move to Netflix next year as part of a major streaming deal worth more than $5 billion.

TKO Group Holdings Inc., which houses WWE and UFC, said in a regulatory filing on Tuesday that the agreement is for 10 years, with Netflix having an option to extend the deal for an additional 10 years. There’s also an opt-out available to Netflix after the initial five years.

“Raw,” which debuted in 1993, has produced 1,600 episodes to date and features wrestlers such as Cody Rhodes, Becky Lynch, Seth Rollins, and Rhea Ripley. The three-hour program currently airs on USA Network and its media rights were considered a hot commodity over the past several months, particularly after the WWE return of CM Punk in November, with many speculating it could land at any number of networks or streaming platforms.

“We are excited to have WWE Raw, with its huge and passionate multigenerational fan base, on Netflix,” Chief Content Officer Bela Bajaria said in a prepared statement.

WWE said Tuesday that “Raw” will air on Netflix starting in January 2025. This will impact viewers in the U.S., Canada, the U.K., Latin America and other territories. WWE said that it will also impact additional countries and regions over time.

“This deal is transformative,” Mark Shapiro, TKO president and COO, said in a prepared statement. “It marries the can’t-miss WWE product with Netflix’s extraordinary global reach and locks in significant and predictable economics for many years. Our partnership fundamentally alters and strengthens the media landscape, dramatically expands the reach of WWE, and brings weekly live appointment viewing to Netflix.”

WWE also said that its documentaries, original series and forthcoming projects will be available on Netflix internationally starting in 2025.

The move of “Raw” to Netflix follows the announcement in September by World Wrestling Entertainment Inc. that “Friday Night Smackdown,” would be moving from Fox to USA Network in 2024 under a new five-year domestic media rights partnership with NBCUniversal. As part of the agreement, WWE will also produce four prime-time specials per year that will air on NBC, starting in the 2024/2025 season. This will be the first time that WWE will air on the network in prime time.

Speaking on CNBC, TKO CEO Ariel Emanuel said that he didn’t believe there’s a move away from traditional television networks or cable networks, but that streaming platforms were becoming another option, as seen through its “Raw” deal with Netflix.

“This is the streaming play. For us, it’s the next step,” he said.

WWE also announced Tuesday that it reached a deal with Dwayne “The Rock” Johnson that will give the star the rights to his nickname. Johnson will also join the board of TKO Group.

Shares of TKO Group jumped more than 19% in early trading.

It is a name that has become almost synonymous with professional wrestling but its bearer, Dwayne Johnson, has never legally owned “The Rock.”

That will change under a new agreement with the WWE under which Johnson will also join the board of TKO Group, the sports and entertainment company that houses WWE and UFC.

“The Rock” is a name derived from Johnson’s father, WWE Hall of Famer Rocky Johnson, who was the first Black champion in WWE history (alongside partner Tony Atlas), according to the WWE.

Johnson, in an interview on CNBC, would not discuss the financial value of the deal with WWE but said that the name “The Rock” means a lot to him personally.

“I owe that name everything,” Johnson said. “Without that name, there’d be no wrestling career. There’d be no Hollywood career.”

Johnson, a movie and wrestling star, has a business portfolio that includes his production company Seven Bucks Productions, tequila brand Teremana Tequila, energy drink company ZOA Energy, Project Rock apparel brand and the United Football League.

Johnson said on CNBC that this will be his first time serving on the board of a publicly traded company.

“I’m very motivated to help continue to globally expand our TKO, WWE, and UFC businesses as the worldwide leaders in sports and entertainment — while proudly representing so many phenomenal athletes and performers who show up every day putting in the hard work with their own two hands to make their dreams come true and deliver for our audiences,” Johnson said in a prepared statement. “I’ve been there, I’m still there and this is for them.”

TKO Group Holdings Inc. says Johnson’s board appointment, effective Tuesday, reflects its “commitment to delivering long-term value and strong performance for shareholders through strategic growth initiatives across both UFC and WWE.”

Johnson began his wrestling career with WWE in 1996. The third-generation wrestler became famous for rivalries with wrestlers including “Stone Cold” Steve Austin and Triple H and his finishing maneuver, The Rock Bottom, according to his biography on WWE’s website. He has won eight WWE championships, has a New York Times bestselling autobiography, “The Rock Says,” and starred in movies including “Fast X,” “Black Adam,” “Jungle Cruise” and ”Jumanji: Welcome to the Jungle.”

Johnson has recently appeared on World Wrestling Entertainment Inc.'s “Smackdown” and “Raw” television programs, with rumors swirling that he may compete at this year’s WrestleMania.

“I am thrilled to partner with Dwayne and welcome his immense talent to TKO’s Board,” TKO CEO Ariel Emanuel said in a prepared statement. “Dwayne brings an incredible track record of creating content and building globally recognized consumer brands, and he will play a key role in realizing our ambitions for TKO.”

TKO also announced Tuesday that Brad Keywell will become a board member. Keywell has co-founded and led multiple companies, including Groupon, Echo Global Logistics, MediaOcean, and Uptake Technologies, where he is currently the founder and executive chairman.

The additions of Johnson and Keywell will increase TKO’s board from 11 to 13 members.

Shares of TKO Group surged more than 19% in morning trading after TKO announced WWE’s weekly television show “Raw” will move to Netflix next year as part of a major streaming deal worth more than $5 billion.

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