Netflix, the leader in paid streaming TV, lost 970,000 subscribers in the second quarter, the company said in a statement Tuesday evening. That was less than half what Wall Street feared, thanks in large part to a new season of Stranger Things, the service’s most popular English-language series.
That cheered investors, who sent the stock up as much as 12 per cent in extended trading. This quarter, Netflix expects to sign up 1 million subscribers in the current three-month period. While that’s well short of the 1.83 million analysts forecast this period, it reverses the losses of the first half.
“We’re talking about losing 1 million instead of 2 million — our excitement is tempered by the less-bad results”, Chairman Reed Hastings said on an earnings call moderated by analyst Doug Anmuth of JPMorgan Chase. “But looking forward, streaming is working everywhere. Everyone is pouring in.”
Shares of Netflix jumped as high as $225 (€219.89) in extended trading. They closed at $201.63 in New York on Tuesday, down 67 per cent this year.
Despite concerns about increased competition and a potential recession, Netflix remains confident in its position. The company said its share of total TV viewing in the US hit an all-time high in June at 7.7 per cent.
Management has responded to the subscriber slide by cutting costs and adjusting its strategy on several fronts. The company plans to introduce a lower-priced version of the service with advertising around early 2023, and is testing ways to charge customers for password sharing.
For the second quarter, revenue grew 8.6 per cent to $7.97 billion, Netflix said. That missed Wall Street estimates of $8.04 billion, in part because of the strong dollar.
During the quarter, Netflix lost 1.3 million customers in the US and Canada, its largest region, and another 770,000 in Europe, the Middle East and Africa, its second-largest. Those are the steepest quarterly declines the company has reported in either place since it started supplying individual results from those markets.
Growth in the Asia-Pacific region offset those declines, however. Netflix added 1.1 million customers in the region, after cutting prices in India.
Mr Hastings had positioned Netflix as an advertising-free alternative to cable TV, but now says advertising is necessary to appeal to people who find the service too expensive.
The company will introduce the advertising-supported option first in a handful of countries, and just tapped Microsoft Corp. to handle ad sales and technology. Advertising will start small and look a lot like other video businesses ads. But Netflix believes it can be substantial, Chief Operating Officer Greg Peters said.
Netflix has raised prices several times and is now one of the most expensive streaming services. — Bloomberg
