Netflix Scraps Subscriber Forecast, Calls It Guidance Evolution
Streaming pioneer will no longer provide subscriber guidance despite suggesting business is reaccelerating.
October 18, 2022
Starting next quarter (Q422), Netflix (NFLX) will no longer provide guidance for regional paid memberships. The change, which Netflix describes as an evolution in its guidance, is an effort to focus investor attention on revenue rather than subscriber growth.

Not coincidentally, the less transparent guidance coincides with two strategic pivots that could prove to be headwinds to subscriber growth.

Without additional disclosure, the launch of the company’s ad supported tier may make it more difficult for investors to understand how much the new tier is cannibalizing paid memberships. Likewise, the guidance change also coincides with the roll out of paid sharing— the company’s crackdown on members who share their account passwords with friends and family— potentially making it difficult for investors to gauge forced churn, if any.

The emphasis on revenue comes two quarters after a separate but related change related to paid sharing clearly designed to inflate Netflix’s new preferred key metric, average revenue per member (ARM).

When an account owner is convinced to pay extra to share their account, Netflix— as revealed in the footnotes of its Q1 Shareholder Letter— does not intend to count the account owner’s friends and family as new subscribers. This would increase paid members, the denominator in Netflix’s calculation method, and depress ARM.
Related: DIS, AMZN, CMCSA, PARA
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