Netflix celebrates subscriber addition in the third quarter

Netflix reversed its recent subscriber loss with a summer boost that management is hoping to build with the upcoming launch of a cheaper version of its video streaming service. that will include advertising first.

The Los Gatos, California, company revealed on Tuesday that it attracted 2.4 million subscribers between July and September, a comeback after losing 1.2 million customers. in the first half of the year amid stiffer competition and soaring inflation that are tightening household budgets.

Netflix now boasts 223 million subscribers, allowing the company to at least temporarily regain its position as the world’s largest video streaming service. Walt Disney The company eclipsed Netflix in August when it reported its service had 221 million subscribers, a number that will be updated on November 8 when Disney is expected to report results in the summer.

“Thank God we’re done shrinking the quarters,” said Netflix co-CEO Reed Hastings during a video conference call Tuesday. “We’re getting back to being positive.”

Increased subscribers also helped Netflix earn $1.4 billion, or $3.10 per share, down 4% from the same time last year. Revenue increased 6% year over year to $7.93 billion. Subscriber gains, earnings per share, and revenue, all top analyst predictions compiled by FactSet.

Shares of Netflix jumped about 14% after the latest figures were released. Even so, the stock has still lost more than half of its value this year, reflecting worries that Netflix’s best days are over.

Now that Netflix is ​​growing again, they’re aiming to accelerate momentum with the first ad-supported plan to launch in the US and 11 other markets in early November. The new option will cost $7. per month in the US, less than half the price of Netflix’s most popular $15.50 per month plan with no commercial interruptions. analyst Haris Anwar said: “Netflix still has plenty of room to grow and capture market share in a price-sensitive market.

In a possible sign, Netflix doesn’t expect the ad-supported plan to be an immediate hit, with management forecasting it will add 4.5 million subscribers between October and December. While that would be Netflix’s biggest quarterly gain this year, it would still be down from the 8.3 million subscribers it added during the same holiday period last year.

Netflix is ​​clearly hoping to reduce Wall Street’s long-term focus on subscriber growth by stopping providing forecasts for how many customers it expects to add from one quarter to the next. Management revealed on Tuesday that its subscriber count forecast for the current quarter will be its final quarter, but it will continue to forecast earnings and revenue in the hope that investors will pay more attention to it. those data.

While investors are generally excited about Netflix’s expansion into the ad market, one big concern is whether the additional revenue from ad sales will be enough to offset the losses from subscribers. Existing subscribers switch to a cheaper option from the higher price they are currently paying or not.

According to FactSet, Netflix is ​​projecting nearly $7.8 billion in revenue for the quarter that includes the holiday season, which has traditionally driven more advertisers, slightly below analysts’ expectations. . If Netflix does live up to its revenue forecast, it translates to a 4% increase from the same time last year. By comparison, Netflix posted an annual revenue increase of 16% for the holiday quarter of 2021.

But an analysis by research firm Insider Intelligence predicts that advertising will contribute a significant portion of Netflix’s revenue. According to Insider Intelligence, over the next year, Netflix will bring in more than $830 million from advertisers in the US, followed by more than $1 billion in the US by 2024.

“The economy is going to be fine,” Greg Peters, Netflix’s chief executive officer, said during Tuesday’s conference call.

Netflix is ​​hoping to garner even more subscribers early next year as it begins to stem the rampant password-sharing that has allowed millions of people to watch its service for free. As a prelude to forcing a segment of the market the company has labeled as “borrowers,” Netflix on Monday revealed a new feature called “Transfer Profiles” that will allow viewers to export their customized recommendations and personal history to a new account.

“All the stars are lined up for us,” Hastings said on Tuesday.

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