Netflix has a message for its investors. The 2022 first-half loss of millions of subscribers could have been worse.
The paid streaming leader lost in the second quarter about 970,000 subscribers. This was, however, less than half of the numbers Wall Street had estimated. The new season of “Stranger Things,” a popular series on the platform, cushioned the fall.
The statement Tuesday cheered the investor and sent the stocks up 12% in extended trading. Netflix expects to sign new subscribers of around 1 million in the current quarter. This is short of the 1.83 million subscribers forecast for the third quarter, though it will reverse the first-half loss.
Netflix stock rose to an intraday extended trading high of $225 before closing at $201.63 in New York Tuesday. The stock is down 67% this year.
Despite threats of recession and increased competition, Netflix remains confident in its position in the streaming TV platform. The company said its market share was 7.7% in June, an all-time US high in TV viewing.
Recovery by Netflix
Netflix reacted to the slide in its subscribers, cutting costs and tweaking strategies in several areas. It plans to introduce lower priced service that includes advertisement in 2023. It is also testing ways to charge its subscribers for sharing the password.
Netflix said its revenue grew 8.6% in the second quarter to $7.97 billion. It missed the estimates of $8.04 billion by Wall Street analysts, one of the reasons being a stronger dollar.
The last quarter saw Netflix lose 1.3 million subscribers in Canada and the US, its largest region. In the Middle East, Africa, and Europe, it’s the second largest region; it lost 770,000 customers. This was the steepest decline reported from these locations ever since Netflix started giving individual market results.
The growth in the Asia-Pacific region offset the losses suffered in top regions. After cutting prices in India, the company reported adding 1.1 million subscribers in APAC.
Reed Hastings, CEO and Co-founder of Netflix had positioned Netflix as an advertising-free platform but now feel that commercials are necessary. After raising prices several times, Netflix is now the most expensive streaming platform.
The company has tapped Microsoft Corp. to handle Ads technology and sales. It will roll out its advertisement-supported subscriptions in a few countries. COO Greg Peters says advertising will initially start in a small way and resemble other video business ads. In the long run, it can become substantial.
Netflix has also started to release new episodes in batches instead of having all episodes of a season released at the same time. This will extend the life of its biggest shows and ensure subscribers keep the services going to finish the season. On Tuesday, Netflix announced it would acquire the Australian animation studio Animal Logic, which had worked on “The Lego Movie.”
