The streaming service recently had to contend with falling user numbers. In the past quarter, however, the trend was broken again.
(Photo: AP)
Philadelphia Netflix has stopped losing customers for the time being. Thanks in part to the success of series such as “Stranger Things” and “Dahmer – Monster”, the number of users worldwide rose by 2.4 million in the past quarter, the streaming service announced on Tuesday. Analysts had only expected around a million. For the full year, the company is targeting 4.5 million additional subscribers.
“After a difficult first half of the year, we see ourselves on the right path to accelerating our growth again,” the company said in a letter to shareholders. Netflix had 223 million subscribers at the end of September. In the first half of the year, Netflix lost 1.2 million customers because they tightened their belts due to the weakening economy and the pressure from competitors such as Amazon Prime or Disney + was growing.
According to the information, quarterly sales were $7.9 billion, an increase of almost six percent. Earnings were $3.10 a share, more than analysts had expected. Netflix titles rose 14 percent in the US after-hours business.
Netflix was able to report an increase of 4.4 million subscribers in the same quarter of the previous year. Nevertheless, investors and analysts breathed a sigh of relief on Tuesday evening.
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Sophie Lund-Yates, an analyst at trading house Hargreaves Lansdown, praised “Netflix’s surprising growth in subscribers.” Compared to its younger competitors, Netflix is profitable – a sign of the maturity of its business model. Nevertheless, the competition does not sleep. “For Netflix, it was previously sufficient to be the largest provider on the market.” That’s over, says Lund-Yates. Netflix is faced with the balancing act of investing in new hit series while maintaining its spending discipline.
Great expectations of ad-supported subscription
At the beginning of November, Netflix wants to introduce a new tiered fee system that is intended to make the service attractive to new users – including through subscriptions with advertising. This will be introduced in the USA, Germany and ten other countries and should increase the number of users by 40 million in 2023, the price is around five euros.
“The challenge for Netflix is that its competitive advantage is eroding. Competitors are catching up on content quality,” says Lund-Yates. The prices quoted for the ad-supported version are still not cheap compared to Disney+ and Hulu – at the same time Netflix runs the risk of driving existing customers into cheaper subscriptions.
Raj Shah from the consulting firm Publicis Sapient fears that Netflix’s hopes for the new ad-supported tariff will not be fulfilled.
“Consumers are faced with an oversupply of options and are increasingly willing to sacrifice non-essentials in the face of rising inflation. This includes streaming services. Even an inexpensive tariff will only be able to retain subscribers with high-quality content,” says the North America expert. “Netflix publishes 700 titles a year, more than any other provider. In order to grow, however, you need less quantity and more quality.” Netflix also needs to invest more in marketing.
Netflix cited the appreciation of the dollar, which could generate “significant headwinds,” as possible negative factors for year-end business, as well as a possible further weakening of the economy, which weighs on demand.
After a decade of growth, Netflix lost around 200,000 subscribers in the first quarter of 2022, and 970,000 in the second quarter — a negative record. Netflix boss Reed Hastings had emphasized the positive outlook when presenting the figures. “If we look ahead, we see that streaming works everywhere. Everyone is pouring into the market,” he had explained. The recent trend reversal should strengthen Hastings after the criticism of the past few months.
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