Netflix outpaced its own gloomy quarterly forecasts as it reported losing subscribers for the second quarter in a row, but they don’t seem too sad about it!
The company lost about 970,000 paying customers in the most recent quarter. They are not doing so bad though as they expected to lose about 2 Million customers. This sent investors rushing in, powering the stock up nearly 8 percent in after-hours trading.
“Our challenge and opportunity is to accelerate our revenue and membership growth by continuing to improve our product, content, and marketing as we’ve done for the last 25 years, and to better monetize our big audience,” Netflix said in the report.
The company attributed its slowing revenue growth to a variety of issues, including higher adoption rates of connected TVs, more streaming competition, account sharing and broader factors like sluggish economic growth and the war in Ukraine.
To increase sales, the company said it will focus on evolving and improving its revenue lines, including a widely anticipated ad-based subscription plan and clamping down on free password sharing.
Netflix said it is aiming to have an account-sharing payment system deployed broadly by next year. Meanwhile, the company is working with Microsoft to launch a cheaper subscription plan that includes advertisements, which could launch by the end of this year.
Microsoft will be responsible for designing and managing the platform for advertisers who want to serve ads to Netflix users. Netflix will introduce its ad-supported tier in a handful of markets first, the company said, in places where spending on advertising is already significant.
Netflix has been investing heavily in original content such as hit shows “Squid Game” and “Stranger Things.” The main motivation behind this is to fend off powerhouse competitors such as Disney, with its Marvel and Star Wars franchises.
The recently released fourth season of “Stranger Things” racked up 1.3 billion hours of viewing in just four weeks at Netflix, making it the platform’s biggest-ever English language television release.
“Despite the slowdown, Netflix isn’t in trouble,” said GlobalData managing director Neil Saunders said.
“Tough in some ways, losing a million and calling it success, but really we are set up very well for the next year,” the company’s co-chief and founder Reed Hastings said in an earnings presentation. Netflix expects a gain of 1 million paid subscribers next quarter. It still has about 221 million subscribers.
The streamer is also chasing new lines of revenue and new audiences. Following its announcement last summer that the company intended to explore the market for video games, Netflix has hired multiple executives to significant positions in its gaming division in recent months. It has also releasing mobile games like “Stranger Things: 1984.”
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