Netflix loses subscribers, but it stops the bleeding

New York (CNN Business) – Netflix reported on Tuesday that it lost 970,000 subscribers in the second quarter of 2022, a number well below its own forecast, which forecast the streaming giant would lose two million subscribers.

Netflix loses 970,000 subscribers in the second quarter 1:24

The company also said it will add another 1 million subscribers in the third quarter, a number slightly below Wall Street expectations. But investors were clearly pleased with the results, and Netflix shares were up 8% Tuesday in after-hours trading.

After revealing in April that it had lost 200,000 subscribers, causing its stock price to drop sharply, all eyes were on Netflix on Tuesday, as Wall Street, Hollywood and the media world focused heavily on viewing numbers. The company’s shares have fallen sharply during a terrifying year.

But Netflix’s second-quarter profit came in at $1.4 billion, up from $1.3 billion in the previous quarter. Revenue increased about 8.6% year over year, to $7.9 billion.

Netflix’s biggest subscriber loss came from its biggest markets, the United States and Canada, where the streaming giant said it lost 1.3 million users in the second quarter. But this has been offset by increased subscriptions elsewhere.

“The challenge and opportunity we face is to accelerate our revenue and membership growth by continuing to improve our products, content and marketing as we have done over the past 25 years, and better monetize our large audience,” the company said Tuesday in its letter to. investors. “We are in a strong position due to our revenue of more than $30 billion, last year’s operating profit of $6 billion, growing free cash flow and a strong balance sheet.”

From the hand of strange things

Netflix (NFLX) needs these kinds of results right now. The previous quarter saw the biggest subscriber loss in its 25-year history, but even that could be considered a win for the company now that numbers are much lower than expected.

In its April earnings report, the company revealed that it lost subscribers for the first time in more than a decade. Its shares have plummeted, hundreds of employees have been laid off, and doubts about the future of the company and the broadcast business in general are growing.

On Tuesday, those concerns were all but washed away as investors were pleasantly surprised that losses were no worse and jeered at the company’s expectations that it would see growth in the third quarter.

There is one thing that will likely keep Netflix subscriber numbers from falling further in the second quarter: the fourth season of the hugely successful sci-fi horror series Stranger Things.

“In its first four weeks, the fourth season of Stranger Things has achieved 1.3 billion hours of viewership, making it the longest-running English-language television season,” the company said.

Tuesday’s results still show losses for a company that needs growth. However, after the last few months of hell for Netflix, the company, and indeed the entire streaming industry, can breathe a sigh of relief. And the company got breathing space to correct the ship’s course without the pressure of falling stock prices or negative pressure.

Long term solutions for Netflix

On Tuesday, Netflix explained to investors how it plans to keep the company on the right track.

“In the short term, a key priority to reaccelerate revenue growth is to develop and improve our monetization,” Netflix said in its letter to shareholders.

The company wrote that in the early days of streaming, Netflix kept its “very simple pricing with only one plan tier” before introducing multiple pricing tiers in 2014. Going forward, it will “focus on better monetization of usage through continuous improvement of our pricing and structures. levels.”

This includes a new, lower price level that will be supported by ads, which will “complement our existing plans.” The company said it expects to launch the plan “in early 2023”.

It was reported last week that Netflix will partner with Microsoft (MSFT) to create this new ad-supported tier.

“They are investing heavily to expand their multi-billion dollar advertising business into premium TV video, and we are thrilled to be working with such a strong global partner,” Netflix said. “It’s possible that in a few years our advertising business will look a lot different than it did at the beginning.”

Netflix has also talked about cracking down on password sharing, saying it’s in the “early stages of working on monetization.” [más de] 100 million families currently enjoy Netflix, but they don’t directly pay for it.”

“We know this is a game changer for our members,” the company said. “Our goal is to find an easy-to-use co-pay offering that we believe works for our members and our business and that we can implement by 2023.”

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