Tech

Netflix Is Anticipated to Log Smaller Revenue as It Spends Extra on Content material

Netflix Inc.

NFLX 0.90%

is banking on its giant slate of leisure to usher in new subscribers and justify its heavy spending on content material.

The streaming platform is striving to attain a steadiness between delivering must-watch programming that pulls new clients and retains others, whereas assuaging considerations on Wall Avenue concerning the firm’s rising programming budgets.

This problem is more likely to develop into extra obvious in Netflix’s fourth-quarter earnings outcomes, that are set to be launched Thursday afternoon.

Netflix projected 8.5 million web new subscribers for the interval, according to the prior 12 months’s fourth quarter. Wall Avenue’s consensus forecast is 8.3 million, in response to FactSet.

Analysts expect the corporate to report quarterly earnings of 83 cents a share, in contrast with a revenue of $1.19 a 12 months earlier. Income is predicted to hit $7.71 billion, up from $6.64 billion.

Netflix’s subscriber progress has pale since a surge in sign-ups occurred throughout the early days of the pandemic in 2020, when lockdowns supposed to discourage the unfold of Covid-19 led individuals to spend most of their time at residence. The reopening of the financial system after the rollout of Covid-19 vaccines has helped drive extra individuals away from their screens. Competitors has additionally grown, with the likes of

Amazon.com Inc.’s

AMZN 0.55%

Prime,

AT&T Inc.’s

T -0.26%

HBO Max and

Walt Disney Co.

DIS 0.99%

’s Disney+ bolstering their content material lineups.

“The business remains to be digesting outsize progress from the pandemic,” UBS Securities analyst

John Hodulik

mentioned.

Netflix backloaded 2021 with hits, together with the return of the darkish drama “You” and the sequence “Cobra Kai.” Films reminiscent of “Pink Discover,” starring Dwayne Johnson, Ryan Reynolds and Gal Gadot, and “Don’t Look Up,” starring Leonardo DiCaprio and Jennifer Lawrence, additionally have been launched throughout the fourth quarter.

‘Don’t Look Up’ with Leonardo DiCaprio carried out strongly with viewers.



Photograph:

Niko Tavernise/Netflix/Everett Assortment

“Don’t Look Up,” a satire a couple of comet that’s on a collision course with Earth, logged greater than 152 million hours of viewership on the streaming platform within the week ended Jan. 2, making it the most-viewed present on the service as measured by weekly knowledge going again to the summer season. The “Don’t Look Up” outcomes come after the success of “Squid Sport,” a South Korean dystopian drama that made its debut in September and have become a worldwide phenomenon.

To maintain the content material flowing, analysts say that Netflix must preserve elevating costs to offset programming prices.

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Final week, Netflix elevated the value for its month-to-month plans within the U.S. and Canada, the primary such enhance from the streaming platform since 2020. In contrast, it reduce its costs in India final month to raised place itself in opposition to rivals in a vital progress market.

Netflix mentioned in October that its loaded content-release schedule was more likely to put strain on margins throughout the fourth quarter. The corporate tasks an working margin of about 6.5%, decrease than the 14% it had within the comparable interval a 12 months earlier. It expects content material write-downs to extend 19% over the prior 12 months, in contrast with 8% progress on the finish of September.

Regardless of the flood of latest content material and the success of “Squid Sport,” subscriber momentum may need eased within the quarter as different streaming companies provided their very own unique content material. Disney+ skilled a bump in app downloads in December due to releases reminiscent of “Hawkeye” and “The Ebook of Boba Fett,” as did

ViacomCBS Inc.’s

VIAC 1.17%

Paramount+ with releases reminiscent of “Clifford the Huge Pink Canine,” “Mayor of Kingstown” and the “Yellowstone” prequel “1883,” Mr. Hodulik of UBS mentioned.

Extra Netflix viewers watched dubbed variations of the South Korean drama ‘Squid Sport’ than subtitled variations. WSJ met one of many present’s English-language voice actors to see how dubbing international content material helps gasoline the streaming firm’s progress. Photograph Illustration: Sharon Shi

Many analysts count on a lot of Netflix’s progress within the coming 12 months to return from worldwide viewers. Positive aspects in Asia, particularly, may drive potential subscriber upside, Financial institution of America World Analysis Analyst

Nat Schindler

mentioned.

To draw new audiences, Netflix is anticipated to spend extra in these markets. “This worldwide progress will enhance strain for the corporate to develop an increasing number of localized content material, with content material prices persevering with to rise in lockstep with subscriber progress,” mentioned

Michael Pachter,

an analyst at Wedbush Securities.

Disney is following an analogous playbook.

After reporting a big slowdown in Disney+ subscriber sign-ups for its fiscal fourth quarter ended Oct. 2, the corporate on Wednesday made adjustments to its streaming administration and launched a hub devoted to worldwide content material creation. Longtime Disney government

Rebecca Campbell

was appointed to supervise the hub.

Write to Kimberly Chin at kimberly.chin@wsj.com

Copyright ©2022 Dow Jones & Firm, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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