Netflix, the world’s largest streaming service reported on Tuesday that it has lost 970,000 subscribers in the second quarter of 2022, as the cost-of-living crisis hit the streaming giant’s profits. But this number is far lower than its own predicted figures, which had projected that the streaming giant would lose two million subscribers.
The company also said it would add another one million subscribers in the third quarter, starting from July but this number was slightly lower than Wall Street expectations. But investors were clearly happy with the results as Netflix shares jumped as much as 8% on Tuesday in after-hours trading. After disclosing in April that it lost 200,000 subscribers which prompted a steep drop in its share price, all eyes were on Netflix Tuesday, with Wall Street, Hollywood and the media world were all focused on its subscription numbers. The company’s shares had dropped dramatically during this horrible year. But Netflix’s second quarter profit came in at $1.4 billion, up from $1.3 billion in the year-earlier quarter. Revenue jumped roughly 8.6% year over year, to $7.9 billion.
Netflix’s more subscribers were lost from its bigger market of the United States and Canada, where the streamer said it lost 1.3 million users in the second quarter. But that was counterbalanced by expanded memberships somewhere else. “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,” the company said Tuesday in its letter to investors. “We’re in a position of strength given our $30 billion-plus in revenue, $6 billion in operating profit last year, growing free cash flow and a strong balance sheet.”
Netflix credited this slowdown in subscribers to many contributing factors like password-sharing, competition and a sluggish economy. The company has vowed to crack down on password sharing in a bid to earn more from members, with two options currently being tested in Latin America.
One thing that likely helped the Netflix subscriber count from further reduction in the second quarter is the fourth season of its science fiction horror series “Stranger Things,” which was wildly popular. “In its first four weeks, ‘Stranger Things’ season four generated 1.3 billion hours viewed, making it our biggest season of English [language] TV ever,” the company said. Netflix is also working to build on the popularity of the megahit series Stranger Things and looking forward to transform its biggest successes into franchises.
It remains the dominant streaming service around the world with nearly 221 million global paid subscribers. It was reported last week that Netflix would partner with Microsoft (MSFT) on building this new ad tier. “They are investing heavily to expand their multi-billion advertising business into premium television video, and we are thrilled to be working with such a strong global partner,” Netflix said. “Our advertising business in a few years will likely look quite different than what it looks like on day one.”
“We know this will be a change for our members,” the company said. “Our goal is to find an easy-to-use paid sharing offering that we believe works for our members and our business that we can roll out in 2023.”