With A Strong Earnings Report, Netflix Readies For The 2022-23 Upfront

With the 2022-23 upfronts approaching NetflixNFLX
which began selling ads last November has scheduled a date and venue for their sales presentation to advertisers. The streaming giant also struck another agreement with audience measurement provider NielsenNLSN
. In addition, Netflix released its fourth quarter earnings report exceeding financial projections.

The three announcements come at a time when the entire streaming industry is confronting challenges, such as increased competition, slower subscriber growth, rising production costs, layoffs, the financial concerns of Wall Street and an anticipated sluggish ad economy ahead.

Despite these concerns in fourth quarter, Netflix increased their subscriber counts by 7.66 million, easily exceeding the expectations of Wall Street of 4.57 million net new subscribers (Netflix which was anticipating a 4.5 million). It was also a threefold increase from the third quarter increase of 2.4 million. Netflix had lost subscribers in first and second quarter of 2022. Globally, Netflix wound up 2022 with 230.75 million subscribers, a year-over-year increase of 4%. Subscriber growth were prevalent worldwide including the United States and Canada which increased by 910,000 subscribers.

While the strong report has helped ease investor concern about Netflix, the earnings report of other prominent streaming providers is scheduled for later in the quarter.

In addition to its earnings report, January has been a busy month for the streaming giant. Earlier in the month Netflix announced they would be holding their first advertising presentation. Netflix had scheduled the Wednesday late afternoon (5 p.m. ET) spot that had been held for decades by CBS (now ParamountPARA
Global). Whereas the “Tiffany Network” held their courtship of marketers at the hallowed Carnegie Hall (and subsequent reception at Central Park’s Tavern on the Green). Netflix will hold their inaugural upfront at midtown Manhattan’s Paris Theater starting with an afterparty. In 2019 Netflix had taken over the lease for the Paris Theater.

CBS decided that instead of one big presentation they would hold a series of more intimate meetings with advertisers in April. In the past, the CBS upfront was one of the highlights of the week, featuring such musical guests as Aretha Franklin, Mariah Carey and The Who. Since the upfront was always scheduled for Wednesday afternoons (Matinee Day) at times, nearby Broadway performers such as the cast of Jersey Boys, Hairspray and Avenue Q would come to entertain advertisers during their intermission.

NBC will continue to lead-off upfront week with a big advertising presentation at Radio City Music Hall on Monday morning. Other media companies have yet to announce their upfront plans.

Netflix is not the first digital company to invade television’s upfront week. Last year Alphabet’s YouTube held a “brandcast” presentation during the TV upfronts. This year YouTube will be returning with a presentation on Wednesday at 7 p.m. (ET) immediately following Netflix. For its presentation, YouTube have changed venues to the larger David Geffen Hall at Lincoln Center (from the Imperial Theater last year), a location where Disney had previously held their upfronts.

According to Nielsen’s Gauge Report, in December 2022, YouTube had an 8.7% share of all TV/video viewers and Netflix share was 7.5%, the largest among all streaming providers. Most digital media companies have their own NewFronts run by the Internet Advertising Bureau (IAB) that is scheduled a few weeks prior to television’s.

Also, this month, Nielsen announced an expansion of its audience measurement agreement with Netflix. The new multi-year agreement covers the U.S., Mexico and Poland. Nielsen says Netflix will have access to their cross-platform audience data. The announcement came one week after Nielsen released Nielsen ONE, its new cross-platform measurement tool available in the U.S. Nielsen had already struck an agreement with Netflix last year. In addition, Nielsen provided viewing data for AmazonAMZN
Prime’s Thursday Night Football.

Before the earnings announcement it was reported the new ad supported tier was off to a slow start. Digiday reported Netflix is only making 80% of its audience guarantee with advertisers and offering its clients cashbacks. The inability to meet audience projections could be caused by lack of subscribers that signed up for the ad supported tier or the lack of viewers to their programs. Netflix had been charging advertisers $65 CPM among the highest in the industry.

Netflix had priced the ad supported tier to subscribers to $6.99 each month and observers noted they did not do a good job promoting the tier to consumers. Antenna reports that in November only 9% of new Netflix subscribers chose the ad supported tier. In addition, of that 9% the Wall Street Journal noted 43% of them were already Netflix subscribers and had opted for the lower priced ad tier service. Netflix projects they will have 40 million ad supported subscribers by the end of this year. In its earnings report Netflix declined to discuss the financial impact of its new ad supported tier

During the fourth quarter, Netflix benefited from such popular shows as Wednesday from Tim Burton (based on the Addams Family character), a new installment of Rian Johnson’s Knives Out movie (“Glass Onion”) Troll, All Quiet on the Western Front, My Name is Vendetta and Harry & Meghan, a documentary series. Netflix announced they would be streaming 49 new and original movies in 2023, down from 2022. It has been reported Netflix will spend $17 billion in content this year. Netflix has yet to address the password sharing involving 100 million households another revenue source.