奈飞：用户肯付钱，却看得少了

Netflix's profit margin this year is expected to hit a new high, cash flow is increasing, and its cancellation rate remains the lowest in the industry.

Yet its stock price has fallen from last summer's high of $133.91 to $63.22.

That's a decline of 52.8%, roughly half.

The business and the stock price have split apart. One reason is that people are watching less: the average user watches about 9% less than three years ago.

Another reason is advertising: the company cut its advertising revenue forecast for next year from $3 billion to $2.7 billion, a 10% reduction.

Peters acknowledged that this year's advertising growth target was set very high, and the company is still a bit short.

He also said the delay comes from advertising technology, as well as from the launch and integration of some new advertising products.

According to Nielsen, YouTube is now the biggest draw on American TV screens, with a viewing share about twice that of Netflix.

Netflix shows only a little over two minutes of ads per hour, while Hulu and Disney+ show about eight minutes.

Wieser said adding more ads would hurt the brand; but spending more on content would also squeeze profit margins.

Netflix once wanted to buy Warner Bros. If that deal had gone through, it would have magnified the same contradiction many times over.

Price increases can push people toward the $8.99-per-month ad-supported plan, but ads sell slowly, and such users bring in less revenue.

Wells Fargo expects advertising to account for more than a third of Netflix's revenue growth next year.

This scrutiny is partly self-inflicted: last year Netflix stopped reporting subscriber numbers, saying viewing hours are the best measure of satisfaction.

Now that viewing hours are no longer growing, the company will report them once a year instead of twice, starting next year.

Netflix has faced downturns before: in 2022 it lost subscribers, then launched an ad-supported plan and cracked down on password sharing.

That approach worked, and the stock price later rebounded sharply.

This time, the company first adjusted its content team. Next year there will be a Narnia film, plus new seasons of Bridgerton and Wednesday.

Cahall believes Netflix should be valued at about 15 times earnings, like Disney, while the market currently gives it about 17 times.

Wieser said that in an optimistic scenario 20 times would be reasonable, but earlier this year the market gave it about 30 times.

Martin said that almost all of Netflix's revenue still comes from a business that has already matured.

Traditional media can put a hit work into theaters, merchandise, theme parks, and licensing to make money repeatedly.

She also warned that artificial intelligence will let YouTube creators make longer, better videos with the same amount of money.

The U.S. is what Netflix calls a mature market, and the competition for viewing here will only intensify.

Next, every quarterly advertising revenue figure will be watched closely.