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As a reminder, the quarterly guidance we provide is our actual internal forecast at the time we report. Our primary financial metrics are revenue for growth and operating margin for profitability. Our goals are to sustain healthy revenue growth, expand our operating margin and grow free cash flow.
1 Excluding the year over year effect of foreign exchange rate movements and the impact of hedging gains/losses realized as revenues (no hedging gains/losses realized in prior periods). Assumes foreign exchange rates remained constant with foreign exchange rates from each of the corresponding months of the prior-year period.
2 ARM (Average Revenue per Membership) is defined as streaming revenue divided by the average number of streaming paid memberships divided by the number of months in the period. These figures do not include sales taxes or VAT.
3 A view is defined as hours viewed divided by runtime for each title. Views are based on the first 91 days of release. For titles released less than 91 days (denoted with an asterisk), data is from launch date through April 14, 2024. We publish weekly our top titles based on engagement at Netflix Top 10.
Beyond Netflix, we use creative marketing to build excitement and fuel fandom. We have bigger and smaller efforts, depending on the genre, potential size of the audience and the conversation we think we can generate. While some campaigns may be more event driven or have significant paid marketing support, social media is a key part of how we drive fandom for our titles. With over 1B followers, we believe that Netflix has one of the largest, most passionate fan bases of any brand in the world on social media. In 2023 alone, our social channels generated over 100B organic impressions.
F/X Neutral ARM growth excludes the year over year effect of foreign exchange rate movements and the impact of hedging gains/losses realized as revenues (no hedging gains/losses realized in prior periods). Assumes foreign exchange rates remained constant with foreign exchange rates from each of the corresponding months of the prior-year period.
To provide additional transparency around our operating margin, we disclose each quarter our year-to-date (YTD) operating margin based on F/X rates at the beginning of each year. This will allow investors to see how our operating margin is tracking against our target (which was set as of January 1, 2024 based on F/X rates at that time), absent intra-year fluctuations in F/X.
Our live video interview will be on youtube/netflixir at 1:45pm PT today. Co-CEOs Greg Peters and Ted Sarandos, CFO Spence Neumann and VP of Finance/IR/Corporate Development Spencer Wang, will all be on the video to answer questions submitted by sellside analysts.
This shareholder letter and its attachments include reference to the non-GAAP financial measures of F/X neutral revenue and adjusted operating profit and margin, and free cash flow. Management believes that free cash flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to repay debt obligations, make strategic acquisitions and investments and for certain other activities like stock repurchases. Management believes that F/X neutral revenue and adjusted operating profit and margin allow investors to compare our projected results to our actual results absent year-over-year and intra-year currency fluctuations, respectively, and the impact of restructuring costs. However, these non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, net income, operating income (profit), operating margin, diluted earnings per share and net cash provided by (used in) operating activities, or other financial measures prepared in accordance with GAAP. Reconciliation to the GAAP equivalent of these non-GAAP measures are contained in tabular form on the attached unaudited financial statements and in the F/X neutral operating margin disclosure above. We are not able to reconcile forward-looking non-GAAP financial measures because we are unable to predict without unreasonable effort the exact amount or timing of the reconciling items, including property and equipment and change in other assets, and the impact of changes in currency exchange rates. The variability of these items could have a significant impact on our future GAAP financial results.
Over the years, Netflix has grown its streaming library making it a major player in the entertainment industry. In addition to licensing content from other studios, Netflix has also invested heavily in original programming, producing hit shows and movies such as Stranger Things, The Crown, and Glass Onion: A Knives Out Mystery. Netflix original content has received multiple Emmy and Oscar awards, and its exclusivity to the platform helps to retain subscribers.
The Walt Disney Company was founded in 1923 by the late Walt Disney and his brother, Roy O Disney. What began as a small animation studio in Hollywood blossomed into a global entertainment conglomerate with a diverse portfolio of businesses, including theme parks, television networks, movie studios, and consumer products.
Despite their differences in history and content offerings, both Netflix and Disney Plus have revolutionised our entertainment consumption habits, and have become major players in the ongoing streaming wars.
The key message here: what took Netflix over a decade was achieved by Disney+ in just 3 years. Of course, Netflix was pivotal in laying the groundwork for on-demand streaming, but those are some pretty impressive stats from Disney.
Meanwhile, Netflix has reported profit year-over-year since 2003, and has a wide range of content offerings and loyal subscriber base. However, its high monthly subscription cost, reliance on a single revenue stream, and increasing competition from rival Disney+ leave future prospects for the company in the hands of subscribers themselves.
It's time to roll out the red carpet and compare the numbers of two of the biggest streaming giants, Netflix and Disney+. In today\u2019s newsletter, we'll take a closer look at how the numbers stack up for each company, and see who comes out on top in this financial face-off. Grab your popcorn and let's dive in!
Netflix and Disney+ are two of the leading streaming platforms worldwide, offering a vast array of movies, TV shows, and original content to audiences around the world. While Netflix has been around for over a decade, Disney+ is the new kid on the block and has quickly become a force to be reckoned with. But which reigns supreme? Let\u2019s take a look at the financials.
In 2019, the on-demand streaming platform Disney+ was created as a means of diversifying Disney\u2019s income, and reducing reliance on traditional media channels which have been impacted by consumer behaviour. Despite its recent launch, Disney+ has quickly gained a massive following with its collection of classic Disney films, as well as new original shows including The Mandalorian and WandaVision.
A notable contrast between Disney and Netflix\u2019s income statements is the diversification of Disney\u2019s income. As mentioned, Disney generates revenue from multiple sources such as theme parks, media networks, and merchandise sales in addition to their streaming service.
Despite these numbers, Disney\u2019s 2022 performance actually failed to match analyst expectations, causing share prices to drop by 8% following the release of its annual report. Furthermore, Disney+ as a segment of the company is not yet profitable, with $1.5 billion in losses reported in the streaming division in 2022. Yikes.
In conclusion, both companies have their own strengths and weaknesses. Despite showing incredible growth in its subscriber base, Bob Chapek\u2019s $1.5 billion loss for Disney+ in 2022 has left the Walt Disney Company in a struggling position. We\u2019re interested to see how the profitability of Disney+ changes under Bob Iger\u2019s tenure.
In the early 2000s, in one of my original attempts at angel investing, I was a partner in a UK clone of American DVD rental company, Netflix. We got off to a good start but needed more capital, which was harder to find back then. I persuaded Stelios Haji-Ioannou, the founder of budget airline easyJet, to inject additional capital, but the deal fell through. The business was eventually sold to LoveFilm before it was in turn bought by Amazon.
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