Netflix loses subscribers, but stops the bleeding

Netflix loses subscribers, but stops the bleeding

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

The company also said it would 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 rose as much as 8% Tuesday in after-hours trading.

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

But Netflix’s second-quarter profit was $1.4 billion, up from $1.3 billion in the year-earlier quarter. Revenue increased approximately 8.6% year over year to $7.9 billion.

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

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

From the hand of ‘Stranger Things’

Netflix (NFLX) needs these kinds of results right now. The previous quarter saw the biggest loss of subscribers in its 25-year history, but even that could be considered a win for the company now that the numbers were 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 plummeted, hundreds of employees were laid off, and doubts about the future of the company and the streaming business in general grew.

On Tuesday, those concerns were all but dashed as investors were pleasantly surprised that losses weren’t worse and cheered the company’s projection that it will see growth in the third quarter.

One thing that likely kept Netflix’s subscriber numbers from falling further in the second quarter: the fourth season of its wildly successful sci-fi horror series “Stranger Things.”

“In its first four weeks, the fourth season of ‘Stranger Things’ generated 1.3 billion hours of viewing, making it our longest season of English-language television,” the company said.

Tuesday’s results still showed losses for a company that needs to grow. However, after the last few hellish months for Netflix, the company, and indeed the entire streaming industry, can breathe a sigh of relief. And the company got some breathing room to right the ship without the pressures of its stock price plummeting or negative press.

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 re-accelerate revenue growth is to evolve and improve our monetization,” Netflix said in its letter to shareholders.

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

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

It was reported last week that Netflix would be partnering 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 delighted to be working with such a strong global partner,” said Netflix. “Our advertising business in a few years is probably going to look a lot different than it did in the beginning.”

Netflix has also spoken about clamping down on password sharing, saying it is in the “early stages of working to monetize [más de] 100 million households currently enjoying, but not directly paying for, Netflix.”

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

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