Netflix reported earnings on Tuesday night, and the more time I have to digest them, the more impressive they seem. The company just posted its best subscriber growth ever--ironically, in the last quarter they'll even disclose that figure. "We thought it was a typo," Bernstein analysts wrote.  

Netflix added 19 million subscribers in the fourth quarter alone--the most ever. They added more at the end of last year than they did at the height of Covid! They now have 302 million total subscribers, and still only consumed 8.5% of total TV and streaming time last month, per Nielsen. They're just starting to add live sports. In other words, they still have plenty of room to grow.  

The stock soared 13% on Wednesday and is rapidly approaching $1,000 a share. Netflix as a whole is now worth a whopping $414 billion. I still remember the heated debates we had in the Wall Street Journal newsroom about whether its 100x valuation was justified a decade ago. Welp, it turns out the answer was yes.  

And its impact is even broader than that. Their incredible earnings landed just days before we learned that CNN is laying off more than 200 employees, or about 6% of its staff, to "refocus around a global digital audience." This comes three years after it pulled the plug on its streaming offering, CNN+. NBC is reportedly also trimming staff this week.  

NBC's streaming product, Peacock, consumed only 1.6% of viewing hours last month, according to Nielsen. Max, owned by CNN's parent company, Warner Brothers Discovery, had just 1.2% audience share. Shares of WBD are trading around $10, and it's less than a $25 billion market cap. NBC is being split up, with channels like CNBC and MSNBC being spun out into a new company later this year that will likely be smaller in size than WBD.  

How, in other words, is traditional media going to compete against these new digital behemoths? YouTube was number one last month, with 11.1% market share (a record high for it), and a parent company worth $2.4 trillion. Netflix was number two. Amazon, also worth $2.4 trillion, was number three.  

You would have to combine Disney's Hulu and Disney Plus, plus Peacock, plus Max, and Paramount Plus, to beat Netflix's market share last month. Paramount is now a tiny $7 billion in size! Netflix will be spending more than twice that amount on content alone next year, which is how they keep staying ahead. 

And while someone may well roll all of these smaller channels up, they have high debt levels to contend with, and a fragmented audience. It's unclear if Disney and Comcast, the biggest of the legacy media brands, have any interest in doing that.  

Wolfe Research is among the firms upgrading Netflix after the results this week, writing that "With accelerating returns on capital, and superior unit economics, we think it could be a very, very long time before Netflix reaches a terminal growth rate." Meaning, the company is only just starting to hit its stride.   

That is very a daunting thought for the traditional media landscape, which seems to rapidly be running out of time.  

See you at 1 p.m! 

Kelly 

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