Wall Street worries that Netflix has a problem with engagement — an issue you can see in the audience numbers the streaming giant periodically releases.
No problem, says Netflix: It will deal with that problem by … releasing audience numbers less often.
Netflix says it is going to stop putting out its “What We Watched” report — a voluminous data dump that details viewership for thousands of individual shows and movies — twice a year, as it has been doing since December 2023, and just did Thursday.
Instead, it is going to provide the information once a year.
Why? The company is relatively candid about this in the investor letter it released Thursday afternoon: It wants Wall Street to stop focusing on the performance of its shows and movies.
“The goal of separating the publication of the report from our earnings results is to keep the focus on our primary financial metrics — revenue and operating profit,” the company said.
The flip side to that argument: If Netflix felt good about its engagement numbers, it would share them more often.
If you are a close Netflix observer, this move will have a familiar echo. In April 2024, Netflix announced it would no longer release subscriber data every quarter. And it used a similar rationale: It wanted Wall Street to stop paying attention to subscriber data and focus on other metrics instead.
Here, it’s important to note that Netflix isn’t required to release either data sets, at all. And that many of its competitors — including YouTube, its most formidable foe — provide very little data about their services.
So even though the company has become meaningfully less transparent over the last couple years, it still leads its peer set, by a lot. And while some of the impetus in releasing viewership numbers is to impress Wall Street, it isn’t the only reason. Netflix also uses those numbers to woo Hollywood talent who worry their shows and movies may get lost amid all the streamer’s offerings.
But the most important context here is the obvious one: Netflix has been getting grief from analysts and investors about worrying trends evident from the data that it has been putting out. The main one: Netflix subscribers appear to be spending less time with Netflix content than they have in the past.
And this month, Bloomberg highlighted that issue — using data directly from Netflix — with a report that showed that some of Netflix’s biggest shows are seeing a steep drop-off in their second seasons.
Netflix has multiple answers to engagement worriers. It says that its engagement numbers are actually good, for starters. And on the company’s earnings call on Thursday, co-CEO Ted Sarandos insisted that the company’s second-season drop-offs are much less than its peers, for instance.
More broadly, the company has been arguing for a while that “quality of engagement” matters more than sheer tonnage. “As we’ve developed an increasingly sophisticated understanding of how consumers ascribe value to our service, we know not all hours are equal,” the company said in its investor letter.
Still, you can tell Netflix is quite sensitive about the engagement issue: The word “engagement” shows up 13 times in Thursday’s investor letter.
I don’t know whether Wall Street will care about any of this. For years, investors obsessed about Netflix subscriber numbers — so much so that every other entrant in the streaming wars went out of their way to boast about their subscriber numbers. Then Netflix moved on, and investors seemed to move on, too.
But in the last year, Netflix stock has performed miserably, down 40%. A big chunk of that decline came from investors who worried about Netflix’s plan to buy Warner Bros. Discovery for $83 billion — partly because they didn’t like the idea of Netflix laying out that much cash and taking on debt, and partly because of the suggestion that Netflix felt it needed to spend that much to goose growth again.
But even though Netflix ended up walking away from that deal, it didn’t solve its stock problem. Maybe this will help.
