Learning from Netflix's big calls
The business news that matters
Hello and welcome to the latest edition of Off to Lunch…
Netflix’s bosses were on its earnings call last night to update investors on the first three months of the year. The streaming giant has beaten analysts’ expectations with soaring profits and subscriber numbers.
But let’s not focus on the fact that revenue increased by 15 per cent and it has 9.3 million new subscribers. The most interesting part of the call was that the company will stop reporting subscriber numbers from 2025 – and instead prioritise viewer engagement metrics.
Making big calls is something embedded in the company’s culture. Its history is littered with examples of its leaders making changes that impact the short term, but it believes are beneficial for the long term.
On the company’s recruitment page, it says employees are encouraged to “take informed risks, which require courage and encouragement from leaders and peers. We have many successes and failures, which is how we learn and why everyone is evaluated on their whole record (versus simply mistakes or bets that didn’t pay off).”
The film studio model had a rich and well-established century-long history before Netflix came in and changed the game by producing its own content. It also took on the gaming industry and its big players Sony and Microsoft, buying up small studios to create games around their original IP, resulting in 81.2 million downloads last year.
Cutting down on password sharing was another big call (and one I’m only slightly bitter about as my Netflix account was regularly used on three continents before this.) With an estimated 100 million people using someone else’s accounts, it said enough was enough. The share price took a 35 per cent hammering at the time, but subscriber numbers are now at a record high of 269.6 million.
Investors’ love for Netflix subscriber numbers led shares to almost immediately drop 5 per cent yesterday. But Netflix nevertheless believes it is the right move for the long-term health of the company. Speaking on the call, co-CEO Greg Peters said the change was “motivated by wanting to focus on what we see are the key metrics that we think matter most to the business.“
This is easier said than done in many businesses, where the status quo often reigns supreme. But leaders are required to make tough decisions and then see them through, even if they aren’t initially well received. We’d love to hear your stories where you’ve pushed yourself and your business beyond your comfort zone. Email josh.dornbrack@businessleader.co.uk to get in touch.
"One important key to success is self-confidence. An important key to self-confidence is preparation." - Arthur Ashe
Podcast…
The new episode of our Business Leader podcast looks at one of the biggest airlines in Europe. Having taken its first flight in May 2004, today Wizz Air carries more than 60 million passengers every year and is valued at well over £2bn after floating on the stock market in London.
József Váradi founded the company and has served as its chief executive since day dot and discusses how he founded and built the airline, the challenges he has faced and his fascinating views on what it is like running a UK-listed business…
You can listen to the episode on Substack here, Spotify here and Apple here
Other stories that matter…
1. Deloitte’s optimism index shows that UK consumer confidence has increased to its highest level in two years. This is attributed to a slowdown in the rate of inflation and an easing of pressure on household finances. You can read the full report here
2. Ofcom research has found that almost a quarter of children aged between five and seven own a smartphone, with almost a third of them using social media unsupervised. The regulator calls it a “wake-up call for the industry”, reminding tech firms that they have a legal obligation to keep children safe online. You can read the BBC’s coverage here
3. The Guardian reports that India has demanded to be exempt from the UK’s planned carbon tax. It is hoping to use the approach of an election in the UK as a bargaining chip in conversations over a free trade agreement. You can read more here
4. The Co-op bank has agreed a deal to be taken over by Coventry Building Society. Absorbing the bank’s 3 million customers, the deal would see the building society become the country’s seventh largest lender, managing around £90bn worth of assets. You can read more here
5. The Liz Truss book tour seems to be the gift that keeps on giving, but the Cabinet Office has confirmed that the memoir of the country’s shortest reigning leader has officially broken its rules. The former PM divulged confidential information on how her government was run and published the book without formal permission. You can read more here
And finally…
That’s my first week of producing Off to Lunch in the books. We’re on a mission to make this a must-read every day that will help you grow your business.
Let us know what you’d like to see as we look to evolve the newsletter in the coming months. Email josh.dornbrack@businessleader.co.uk with your suggestions.
Thanks for reading. If you enjoy Off to Lunch then please share it with others and spread the word. If this newsletter was shared with you then please sign-up below to get Off to Lunch sent directly to your inbox