Photo Credit: Souvik Banerjee from Pixabay

Earlier this week, Netflix (NFLX) announced its fourth quarter performance that failed to impress the market. The company continues to experiment with several initiatives to drive monetization while investing in content to keep its viewers engaged.

Netflix’s Financials

Netflix’s Q1 revenues grew 3.7% to $8.16 billion, falling short of the Street’s forecast of $8.18 billion. Average revenue per subscriber grew 9%. EPS was $2.88, ahead of the market’s forecast of $2.86.

For North America, Q1 revenue was $3.61 billion with paid memberships of 74.4 million. It added 100,000 new customers in the US and Canadian markets.

Revenue from Europe, Middle East, and Africa was $2.52 billion driven by a net addition of 640,000 subscribers to end the quarter with 77.4 million paying customers. Latin America revenue was $1.07 billion from 41.25 million paid members, with net loss of 450,000 subscribers. Asia-Pacific revenue was $934 million from 39.48 million subscribers, recording a growth of 1.46 million net subscribers.

For the second quarter, Netflix forecast earnings of $2.84 per share on revenue of $8.2 billion. The market was looking for revenues of $8.44 billion and an EPS of $2.91.

Netflix’s Monetization Initiatives

Netflix continued to improve its content portfolio. During the quarter, it had several big returning series and films across genres. Names included Outer Banks, You, Ginny & Georgia, and a big sequel to hit film Murder Mystery. Besides sequels, it also launched several new titles including The Night Agent, La chica de nieve, Rana Naidu, and the movie Kill Boksoon.

Meanwhile, Netflix continues to focus on driving monetization. It has revisited its pricing tiers and wants to be more sophisticated around pricing so that it offers a range of price points and features that suit consumers’ needs. In the past, it has been changing pricing to meet local needs and to further deepen its penetration in lower cost geographies.

For instance, in December 2021 it lowered prices in India by 20%-60%, which helped it grow engagement in the country by nearly 30% year-on-year. More recently, it released an ads plan that allows it to offer consumers a lower price point. While Netflix did not share detailed metrics, it believes that the initial response has been better than its expectations, as it is seeing very little switching from its standard and premium plans.

On the advertiser side, it is launching a programmatic private marketplace to enable more buying options for Netflix ad inventory using Microsoft’s sales platform. It has partnered with Integral Ad Science and Double Verify, which will help in validating campaign engagement of ads viewership on Netflix.

Paid sharing was another important initiative as Netflix wanted to address the account sharing that impacts over 100 million households globally. It has already launched this plan in Canada, New Zealand, Spain, and Portugal to good results, but it has delayed plans of the launch in the US to the current quarter.

Netflix expects that by disabling password sharing, it will see an increase in revenue as is already being seen in the four markets where the service was launched last quarter.

Its stock was recently seen trading at around $327.98 with a market capitalization of around $146 billion. It hit a 52-week high of $379.43 in January and a 52-week low of $162.71 in June last year.

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