Netflix lost fewer subscribers than expected in its latest quarter, reporting a significant drop in membership overall – but only after warning it would suffer a more dramatic drop.
Earlier this year, Netflix reported its first drop in membership in more than a decade – a drop that was supposed to presage an even deeper drop in subscriptions now. Butstill the world’s dominant video streaming subscription service, said subscriber numbers fell by 970,000 to a total of 220.67 million from April to June, according to its second-quarter report on Tuesday.
It’s still the deepest drop in membership the company has ever reported, but it tops Netflix’s April forecast that it would lose 2 million members worldwide. (On average, analysts basically matched their estimate to Netflix advice, according to a Refinitiv survey.)
It’s “hard, in some ways, to lose 1 million and call it a success,” Netflix co-CEO Reed Hastings said in a taped earnings chat on Tuesday night. “But really, we are very well prepared for next year.”
Still, Netflix’s third-quarter outlook fell short of analysts’ expectations, with Netflix predicting it would gain 1 million members against the consensus estimate of a 1.8 million subscriber increase.
Investors still welcomed the news, after Netflix’s share price took a beating this year. In the recent pre-market session on Wednesday, shares of Netflix rose 4% to $209.72. But the stock has lost two-thirds of its value so far this year as Netflix’s sudden dwindling membership has undermined its status as a Wall Street darling, just as it has shaken Hollywood’s faith in streaming as the engine of the future of television.
Years of uninterrupted Netflix subscriber growth has caused nearly every major Hollywood media company to pour billions into their own streaming operations. These so-called streaming wars have caused a flurry of new services, including Apple TV Plus, Disney Plus, HBO Max, Peacock and Paramount Plus – a flood of streaming options that has complicated how many services you should use ( and, often, pay) to watch your favorite shows and movies online.
Now, feeling the heat of intensifying competition for your attention and your subscription count, Netflix is pursuing strategies it had rejected for years.
For one, the company plans to launch cheaper ad-supported subscriptions, for one. Even though Netflix has paved the way for streaming TV, its no-ads-only strategy lags behind industry standards. As new competitors launch, they’re rolling out subscriptions that give viewers like you more options. Now, most Netflix rivals have a tiered model, usually offering cheaper subscriptions with ads, as well as more expensive subscriptions without ads.
And Netflix is also experimenting with password-sharing fees, aiming to get over 100 million households that already watch Netflix but don’t pay for it directly.
For now, these experiments are confined to Latin America, but Netflix said it plans to roll out a fee structure for account sharing in 2023.
At the moment, he is testing two schemes. In its first version, Netflix charges a fee to add additional subscriptions as official “sub” accounts. Then Netflix said it would try a new method starting next month, which would charge you to add more “homes” where you can stream Netflix in addition to a primary residence, with a limit on the number of homes. additional you can add depending on how much you already pay for Netflix.
Elsewhere in its report, Netflix said membership in the United States and Canada, its largest region (for now), fell by 1.3 million to a total of 73.28 million. Subscriptions also fell in Europe, the Middle East and Africa, down from 770,000 to 72.97 million.
But in the Asia-Pacific region, Netflix added 1.08 million subscribers to reach 34.8 million, and in Latin America the company added 10,000 new members for a total of 39.62 million.
Overall, in the most recent period, Netflix posted earnings of $1.44 billion, or $3.20 per share, compared to $1.35 billion, or $2.97 per share, a year earlier. Revenue rose 8.6% to $7.97 billion.
Analysts on average had expected earnings per share of $2.75 and $8.04 billion in revenue.