The streaming giant Netflix Last night it released its second-quarter financial results, surpassing profit forecasts but not revenue expectations. Reported earnings per share were $ 3.2 compared to analysts’ forecasts of $ 2.94. The company’s revenue totaled $ 7.97 billion, not exceeding analysts’ expectations of more than $ 8 billion. The company’s stock soared 8% in late trading in New York (the stock has lost about two-thirds of its value since the beginning of the year).
The reports are much better than expected, and the horror forecasts did not materialize – this after a particularly difficult year last (a stock that was down 70% this year, the market value dropped from $ 300 billion straight to the $ 90 billion districts in less than a year).
It could have been a lot worse
As mentioned, Netflix recorded much better reports than expected. While earnings per share exceeded forecasts, revenues came in lower than expected, growing 8.6% to about $ 8 billion. However, the eyes of investors and shareholders are examining the number of the company’s subscribers.
In the previous quarter, the company reported a loss of 200,000 net subscribers, and it said it was expected to lose another two million customers in the second, current quarter. The results were much better for her: the company lost only 970,000 paying subscribers, instead of the threatening number, 2 million.
In fact, Netflix has suffered two consecutive quarters of loss of subscriptions for the first time in its history. And although it sounds bad, Netflix is probably breathing a sigh of relief in relation to these results – the company currently has 220.67 million users and that the company estimates that it is expected to add one million new net subscribers in the current quarter that it will report within the current three months. Although this forecast of the company is much lower than the forecasts of analysts, who expected the company to recruit 1.83 million new customers – these million users will regain what the company has lost so far.
If you look back at Netflix’s numbers, in terms of the number of net subscribers who joined or left in the various quarters – you can see a real roller coaster. Before Corona, except for a single quarter, the company added several million customers every quarter (in the first quarter of 2019, 9.6 million sample users joined). Corona has done Netflix a lot of favors, in the first quarter of 2020, 15.8 million users joined, in the second quarter about 10 million users joined. Over time, there were quarters with two million users and quarters with 8 million users. Now, in the last two quarters, the company has reported an abandonment of several hundred thousand users.
Netflix is still the largest streaming company in the world, and it looks like it is managing to maintain its title despite the tough competition in the market.
It all starts and ends with the content
Streaming giants invest a lot of resources and budgets to produce the best content. And in Netflix’s latest reports – they prove just how much it can pay off: the second quarter of this year included the release of the first seven episodes of the fourth season in “Strange Things,” one of Netflix’s most powerful brands. According to the company, “Strange Things” grossed 1.3 billion hours of viewing in its first month, the largest amount ever for a Netflix English TV series.
The popularity of the program exceeded the expectations of the company. It was one of the most successful brands of the service. The craze surrounding the show and its players on social media is growing and growing – and this is exactly what Netflix is looking to do, the company is looking for more hits that will attract an audience.
And not just the content itself, but the form of submission. Unlike previous seasons, Netflix gave the season a longer life with the first part of the series coming in late May, and the last two episodes coming about a month later. So in fact, fans who want to watch the series and started doing it in the first quarter, will have to leave the service until the beginning of the third quarter to finish the season.
But “Strange Things” is not the only series, Netflix has other powerful series like “Umbrella Academy”, “The Crown” and more. But what is clear to her, they have to put out such a hit almost every month to keep the engagement of the subscribers as it was here.
However, Netflix recorded a threatening move against Disney +, immediately after the reports were released last night. Streaming giant Netflix has announced a new acquisition: Netflix is expected to acquire Australian animation studio Animal Logic. This announcement comes amid an already strong partnership between the companies, with a string of films such as “The Magician’s Elephant” and “The Shrinking of the Treehorns” for Netflix. The announcement did not state how much money the company had acquired.
This move will of course strengthen Netflix’s portfolio of animated films, which is already strong with the help of the Oscar-winning films Over the Moon and Klaus. Animal Logic has Hollywood blockbusters on the list, such as “Happy Feet”, “The LEGO Movie”, two “Peter Rabbit” movies and many more. Thus, Netflix plans to especially strengthen its animation capabilities and increase competition with Disney +, which is already growing and threatening it.
Netflix emphasizes that working with the company will accelerate the building of its animation production capabilities, but that it will continue to work with many other studios around the world for other animations. However, “Completion of the transaction is subject to regulatory approvals and other restricted closing conditions. We look forward to closing the transaction later this year,” the statement said.
Netflix is shifting its waist to bring in more subscribers
It can be easily seen that the streaming giant realizes that it has a lot more work to do to maintain a lead in the streaming market. To be the biggest, not only does one have to invest in content as specified, but it has to figure out where it is attracting the subscribers who have not come so far. At the same time, she has to deal with a phenomenon that particularly hurts her – sharing passwords between friends. And Netflix’s recent moves show that it is arming itself fairly to be able to operate on both of these planes.
First, the company recently announced a partnership with Microsoft to create a subscription package for a market segment that it has not touched on so far. The idea is to create a new subscription program that is supported by advertisements and will cost less to consumers, alongside existing packages. “Microsoft has the proven ability to support all of our advertising needs as we work together to build a new, low-awareness suite,” it said. All ads displayed on Netflix will be exclusively available through the Microsoft platform. There is no doubt that these advertisements will also be an important revenue engine for Netflix, and not just a response to consumers who want a cheaper package.
So in fact consumers who want to consume Netflix content but do not want to pay for an expensive package and do not care that there will be advertisements in the arena, will be able to use the service. This is how the streaming giant opens itself up to audiences it has not addressed before. The company is now updating that it plans to launch the package in early 2023.
The problem of password sharing is also at the heart of Netflix. In the first quarter, the company presented a particularly worrying statistic: More than 100 million households worldwide use shared passwords to access content, of which more than 30 million households in the U.S. and Canada. This prompted the company to look for ways to overcome this hurdle. , Which led her to announce a new feature on the day of publication of the reports.
Netflix has announced a new experiment with a feature called “Add a Home” in Argentina, the Dominican Republic, El Salvador, Guatemala and Honduras. How will it work? Each account will be associated with one home, and using an account in another home will incur an additional payment of about $ 3. Subscribers to the basic package can add one more house, in the standard package up to two more houses, and in the premium package up to three. According to the company’s announcement it seems that this will also apply to existing customers.
So in fact, if its experiment succeeds, Netflix will be able to profit from many more users who have so far not paid for the service at all. And beyond the money, the company will be able to consider more users in the number of its users, because the company is likely to treat another home as a separate paying customer, even if it is at a lower price.
Netflix has a lot of work to do, and the competition is particularly tough
The data on Netflix’s second quarter and its various moves – mostly prove that Netflix is not willing to sign up to save. The company is looking for growth engines and looking for other ways to keep users with them and not go to competitors. Competition in the streaming market is tough, Netflix is trying to innovate and strengthen itself to maintain its impressive title.
And while the reports were far better than they could have been, looking ahead, Netflix has a lot of work to do and quite a few headaches. The company expects revenue of $ 7.84 billion in the third quarter of this year, while Wall Street estimates stand at $ 8.1 billion. Also for earnings per share, the company sees $ 2.14, while estimates speak of $ 2.72. In other words: its challenges and difficulties are not going anywhere and Netflix must continue to prove itself and fight for its place.