Netflix (NFLX) plans to report fourth-quarter 2023 earnings on Tuesday, January 23, and expects additional fourth-quarter subscriber growth as it rolls out ad-tier subscription plans and cracks down on password sharing. doing.
Michael Pachter, managing director of equity research at Wedbush Securities, joins Yahoo Finance to discuss the data the streaming giant expects in its earnings.
“When investors report that number, they'll be pleasantly surprised. They'll exceed that 8.75 million.” [new subscriber] I think they'll probably make a million or two million more than that,” Pachter said.
Pachter went on to comment on Netflix's efforts to stream top video game titles.
For more expert insights and the latest market trends, click here to watch the full episode of Yahoo Finance Live.
Editor's note: This article was written by luke carberry morgan.
video transcript
Jared Breichle: Netflix expects to end the year on a strong note when it reports earnings next week. Two analysts raised their price targets for the stock ahead of earnings. Over the past year, the streamer has weathered a storm of Hollywood price gouging: Hollywood strikes, price hikes, and additional ad inventory. Joining us today is Michael Pachter, managing director of equity research at Wedbush. Thank you for joining us this Friday afternoon. What do you expect from this report next week? Please give us a general idea.
Michael Pachter: I think the number of subscribers will definitely increase. I think we're particularly seeing that growth in the United States and Canada. We say this because we conducted research and found that both ad-supported products and crackdowns on password sharing are gaining real attention. Her 15% of subscribers who were notified that they were sharing their password actually chose to add another account. In other words, ARPU increases. It is considered the same account.
But that number that you reported in boilerplate just before this was 15 million ad-supported subscribers. This number increased to 23 million during the quarter. So where did those 8 million people come from? This is directly due to a decrease in the number of people who would otherwise have left in large numbers. So I think you, or your investors, will be pleasantly surprised when we report the numbers. They should hit that 8.75 million goal. I think they'll probably make a million or two million more than that.
Josh Lipton: And Michael, listen, my friend, it's so nice to meet you, and I always look forward to having you on the show. I wanted to get your perspective on this company from a different perspective, Michael, because listen, no one knows more about the video game space than you. Their game strategy, Michael, now they offer the game. they are free. This is a kind of way to keep users interested. Michael, what do you think their long-term strategy is when it comes to gaming? And how do they make money from it?
Michael Pachter: You know, we showed two guys, Ted Sarandos and Greg Peters, making decisions. My guess is that neither of them have ever played a game in their lives, and it shows. They obviously don't know what they're doing. So their strategy is to offer things on Netflix that you can't get anywhere else. And the problem is, even though consumers can get games almost anywhere, they don't really think of Netflix as the place to go. In other words, they're trying to use the same strategy in games as they do in TV, movies, and exclusive content. That won't work.
So it's better to put all kinds of games on the Netflix landing screen. Now, let's play “Candy Crush”. But instead of going to your PC or accessing another app, try launching it from the Netflix app. And once consumers get used to playing it, it will work. Therefore, long-term strategies will need to change. This is doomed. There's no chance they'll make any money from this.
They recently pulled back on that exclusivity by adding the “Grand Theft Auto” mobile trilogy. I know you're all dying to buy it. 11.99 on iPhone. And it's free on Netflix. So, good luck. The number of downloads has exceeded 20 million. Therefore, consumers respond to getting something for free on Netflix that they would have to pay for elsewhere. But it costs money. I think Netflix had to spend $20 million or $40 million to get exclusive footage.
I think they have to do more of that. And instead of paid downloads, they should offer free-to-play games like Fortnite. For example, “Fortnite” is banned from the App Store, so we wouldn't be able to play it on our phones otherwise.
