Tuesday night Netflix put out its Q4 numbers and I ended up reading the shareholder letter instead of going to bed at a reasonable hour, which tells you something about the state of my January. Two things jumped out and neither one was really about a show.
First: Ted Sarandos is now co-CEO. Reed Hastings isn't going anywhere, he's still in the chair, but Sarandos (who's basically run content since forever, the guy who greenlit House of Cards back when that was a genuinely weird bet) now has the title to match the job he's clearly already been doing. I dont think this changes much day to day. It's mostly Netflix admitting on paper what's been true for years, that the content side of the business is the business now, not some department that reports up to a tech guy. Feels like a formality except it isn't, because titles at that level actually mean something for succession planning and who Wall Street calls when something goes sideways.
Second thing, the one I actually care about: Netflix said it added 8.51 million subscribers in the quarter and that it expects to be free cash flow positive for the full year going forward, meaning no more borrowing billions to fund content. For something like a decade now the running joke about Netflix has been "great company, terrible balance sheet," piling up debt to outspend everyone on originals while promising profitability was always one or two years away. Now theyre saying the spending and the subscriber base have finally crossed over enough that they can fund the machine out of its own cash. Thats a genuinely different company than the one that existed in, say, 2018.
I've been a subscriber since the DVD mailer days, back when the red envelopes actually showed up in my mailbox, so I have a weirdly long baseline for how this company operates. And the honest complaint I have isnt about money at all, its about the home screen. The autoplay preview thing where a trailer starts blaring the second your cursor drifts near a thumbnail still drives me up the wall. Ive got a two year old who will absolutely come running if a cartoon starts making noise from across the room, and I am constantly scrambling to mute the TV because I hovered too long trying to read a synopsis. Add a setting, its 2021, this cant be that hard.
Content wise its obvious why the subscriber numbers were good. Everyone's still stuck inside in January, its cold, theres nowhere to go, and Bridgerton has apparently eaten the internet since it dropped over Christmas. I watched two episodes over the weekend mostly because my sister wouldnt stop texting me about it and I wanted to know what a "diamond of the season" was. Cobra Kai's third season also just landed on Netflix this month after jumping over from YouTube Red (RIP), and thats been the actual thing playing in my living room most nights, not Bridgerton. Theres something very funny about a Karate Kid spinoff becoming one of the most reliably fun shows on television in 2021 but here we are.
What I keep coming back to though is the cash flow thing, because it changes the incentive structure. A company that has to borrow to make its next season of prestige TV has a different set of pressures than one thats generating its own cash. Less desperation to chase every subscriber at any cost, in theory anyway, more room to actually be picky about what gets made instead of flooding the platform with volume for volumes sake. Whether that plays out that way is a different question, plenty of companies say "were disciplined now" right up until the next quarter when growth slows and the old habits come right back. Stock jumped double digits after hours on the news, which tells you the market liked the story regardless of what happens next.
Anyway. Two CEOs, positive cash flow, and Im apparently the last person in my group chat to start Bridgerton. Not a bad Tuesday for a company that used to mail me DVDs in red envelopes.