Netflix Gains 2.4 Million New Subscribers

Netflix Inc. snapped back to subscriber growth in the third quarter, giving the streaming giant a jolt as it works to execute two major strategic shifts aimed at bolstering its revenue and subscriber base, reports The Wall Street Journal.

The company added 2.4 million new subscribers in the September quarter, after having forecast a net gain of 1 million customers. The subscriber growth followed back-to-back quarters of customer defections that raised questions about Netflix’s ability to expand its user base amid increased competition. 

“Thank God we’re done with shrinking quarters,” co-Chief Executive Reed Hastings said on the company’s earnings call Tuesday. Executives said Netflix had good momentum, but had to continue to work to spur greater revenue growth. 

The company’s shares rose 14% in after-hours trading following the results. As of Tuesday, Netflix’s stock was down about 60% so far this year.

The size of Netflix’s quarterly subscriber additions remained small by historical standards. Netflix had attracted 4.4 million new customers in the third quarter of last year, and the 8.3 million it added in the fourth quarter of 2021 is nearly twice as big as the 4.5 million the company expects to gain in the final period of 2022. Netflix had 223 million subscribers at the end of September.

All companies in the streaming business are facing profound competition and struggling to add new subscribers, which makes it more important to ensure that they are generating as much revenue as possible from their viewers. 

 

WSJ Graphic

In its letter to investors, Netflix said it was starting to see some of its competitors raise prices and others rein in content spending. “While it’s early days, we’re starting to see this increased profit focus,” across the industry, Netflix said in its letter. “Our best estimate is that all of these competitors are losing money on streaming,” said Netflix, which is profitable. The company said it had a competitive advantage over rivals because it focuses solely on streaming. 

According to WSJ, Netflix is in the process of executing two major strategic shifts in an effort to increase its revenue and subscriber base. The first is rolling out its first tier of ad-supported content, which will help increase the average revenue per subscriber Netflix brings in. Last week, Netflix said it plans to begin launching the tier next month and would charge $6.99 a month for it. Netflix said it expects the ad tier to provide significant revenue and profit, and noted it had received strong interest from advertisers so far.

The second is cracking down on password sharing and getting viewers who are sharing accounts to pay to do so. The company has tested different approaches to getting households to pay more to share and said it plans to roll out a sharing policy in 2023.