Why Netflix wants to shift the narrative on subscriber growth, even after bouncing back from losses

After the bell Tuesday, Netflix announced its Q3 earnings, beating expectations and adding 2.4 million subscribers, driven largely by growth in Asia. The news marked a reversal from the previous two quarters when Netflix saw stunning declines in subscriber growth. Wall Street reacted approvingly, with the company’s stock price spiking more than 14% in after-hours trading.

But, while Netflix started adding subscriptions again, the company’s message to investors strikingly suggested that they pay less attention to those very numbers. The streamer announced it will stop providing guidance for its membership, stating that the company is “increasingly focused on revenue as our primary top line metric.”

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“Our competitors are investing heavily to drive subscribers and engagement, but building a large, successful streaming business is hard - we estimate they are all losing money, with combined 2022 operating losses well over $10 billion, vs. Netflix’s $5 to $6 billion annual operating profit,” Netflix boasted.

As an executive at a rival streaming company told CNN on Tuesday, the shift in narrative is “a complete 180” for Netflix, which for years has intensely focused on subscriber growth. So what changed? Mostly, Wall Street’s view on the streaming business, which has soured considerably.

The era in which streamers are rewarded for chasing subscriptions at any cost is decidedly over, especially after Netflix’s tremendous stumble earlier this year. Now Wall Street is far more interested in hearing about revenue growth and seeing a strong business model.

So Netflix is aiming to shift its narrative, choosing to stress now that it has the strongest business model among the streamers. In doing so, the company took an overt shot at its competitors. “While it’s early days, we’re starting to see this increased profit focus,” it said in its shareholder letter, “with some raising prices for their streaming services, some reigning in content spending, and some retrenching around traditional operating models which may dilute their direct-to-consumer offering.” (CNN’s parent is Warner Bros. Discovery, one of the competitors Netflix is clearly jabbing.)

“In other words,” CNBC’s Alex Sherman translated in his story, “Netflix is saying it has built a great streaming business, while Disney, Warner Bros. Discovery, Comcast’s NBCUniversal, Paramount Global, and others want to build a great streaming business.”

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