Netflix shares experienced a significant decline of more than 6.5% in premarket trading on March 6, 2024, despite the company reporting fourth-quarter earnings that narrowly surpassed Wall Street expectations. The stock dropped to $81.33 following the announcement of a substantial increase in spending for movies and television shows, along with the anticipated acquisition of Warner Bros.
In its latest earnings report, Netflix revealed a revenue increase of 18% year over year, totaling $12.05 billion for the fourth quarter, slightly exceeding the projected $11.97 billion. The company’s earnings per share stood at 56 cents, just above the forecast of 55 cents. Furthermore, Netflix’s global subscriber base grew to 325 million, up from 301 million at the end of 2023.
The streaming service also pointed to a robust growth in advertising revenue, which reached $1.5 billion, marking a two-and-a-half-fold increase from the previous year. Despite these positive figures, Netflix’s forecasts for the upcoming quarter fell short of analysts’ expectations, as the company plans to increase its spending on content by 10% this year. The acquisition of Warner Bros. is expected to add an additional $275 million to Netflix’s spending.
CEO Discusses Strategic Acquisition of Warner Bros.
During the earnings call, Netflix CEO Ted Sarandos emphasized the importance of the Warner Bros. acquisition, describing it as “a strategic accelerant” for the company. He confirmed that Netflix is diligently working to finalize the deal, which has been valued at $83 billion. Sarandos expressed enthusiasm about Warner Bros.’ established theatrical business, highlighting its strong film portfolio.
He indicated that Warner films would be released in theaters with a 45-day exclusive window. Sarandos acknowledged the prestige of the HBO brand, stating, “HBO. It is an amazing brand. It says prestige TV is better than almost anything. Customers know it. They love it. They know what it means.”
When addressing concerns about competition, Sarandos argued that Netflix competes with a broader range of platforms beyond traditional streaming. He noted that “TV is now just about everything,” referencing the diverse landscape that includes broadcast television, social media, and other streaming services. He stated, “Oscars and the NFL are on YouTube. Networks are simulcasting the Super Bowl on linear TV and streaming. Amazon owns MGM. Apple’s competing for Emmys and Oscars. And Instagram is coming next.”
Sarandos added that YouTube has evolved beyond user-generated content, highlighting its offering of full-length films and scripted television episodes. His comments reflect Netflix’s strategic positioning within an increasingly competitive media landscape.
As the company prepares for significant financial commitments, the market’s reaction to Netflix’s earnings report underscores the cautious sentiment among investors regarding the balance between growth and expenditure in an evolving entertainment industry.
