After registering a two-quarter loss of subscribers, Netflix appears to be back on track. The streaming company said on Tuesday that it reached 2.4 million subscribers in the third quarter of 2022 – a number that far exceeded expectations of 1 million subscribers.
Additionally, the company said it will likely add 4.5 million subscribers in the fourth quarter, which is also ahead of what investors expected.
In short, Netflix has apparently returned to growth after seeing its inventory and reputation take a hit all year due to subscriber losses. It currently has 223 million users worldwide.
The news soared the company’s shares, which rose 13% on Tuesday in after-hours trading.
The platform’s third-quarter profit was $1.3 billion, down from $1.4 billion in the year-ago quarter. Revenue increased about 6% year-over-year to $7.9 billion. Both metrics were ahead of what the company projected for the quarter.
“After a challenging first half, we believe we are on track to re-accelerate growth,” the company said in its letter to shareholders.
Ads to the rescue?
Tuesday’s earnings were a return to form for Netflix, and while it may not be growing at its former pace, it’s also not the same company it once was. The platform launched “Basic with Ads,” its ad-supported subscription plan, last week.
The new bundle, which will cost $6.99 a month in the US and will be available on November 3, is a major strategic shift for the streaming giant, which has said for years that having commercials on the service was not something it wanted to do.
But after the rough 2022 Netflix has had so far, the company knew it needed to make some tough choices.
The company in April reported a surprising loss of subscribers for the first time in more than a decade. Its stock plummeted, the company lost billions in market value, hundreds of employees were laid off, and the media darling’s future was in question.
Netflix needed to show investors that it could bring in more money as its subscriber growth was apparently slowing. Offering a cheaper advertising plan was the only way to do this.
“As we’ve discussed over the past few quarters, improving our pricing strategy is an important short-term focus,” the company wrote on Tuesday. Noting that the “reaction from advertisers so far has been overwhelmingly positive”.
“We believe that more choice, especially for more price-conscious consumers, will translate into significant incremental revenue and operating profit over time,” it said in a statement.
“That said, it is still very early days and as we maintain our existing ad-free plans, it will take time to build our member base and associated ad revenue.”
Netflix added that password sharing, another way to increase revenue, would be implemented “more broadly” starting early next year.
content is king
With Tuesday’s earnings, Netflix appears to have straightened out, at least for now. But the challenges are yet to come, the biggest of which is more competition than ever before – a point the company itself has reported.
“As we have long said, we operate in a highly competitive industry where people have many different entertainment options – from linear TV to streaming, YouTube to TikTok and gaming to social media,” Netflix wrote. “The bright side is that the opportunity is very big and growing.”
The company believes it has “a long road to growth if we can keep improving our offering steadily over time”.
The platform probably did just as well in Q3, thanks to several hits from “Stranger Things 4” in July to “Monster: The Jeffrey Dahmer Story” in September.
“While we’ve had our share of mistakes, we’ve managed to create a very broad list with many great series and movies, whatever your mood or taste,” the company said.
Source: CNN Brasil
Joe Jameson, a technology journalist with over 2 years of experience, writes for top online news websites. Specializing in the field of technology, Joe provides insights into the latest advancements in the industry. Currently, he contributes to covering the world stock market.
