2023-07-19 23:43:15
Netflix gained significantly more new subscribers than expected in the past quarter. The streaming service reported an increase in its subscriber base of nearly 5.9 million over the past three months. Analysts had expected an average of around 2 million additional subscribers. The numbers rose in all regions of the world, most strongly in Europe. The company is in much better shape than it was a year ago, when it lost subscribers in the first two quarters.
Netflix shares were still down in after-hours trading. This may have something to do with the fact that the company’s sales fell slightly short of expectations. However, the stock has gained more than 60 percent in value since the beginning of the year.
Netflix linked the growth in subscribers to its offensive against password sharing. This has been a widespread practice so far, with the company saying more than 100 million people have used the service without paying for it or anyone else in their household. Last year it started initial tests to convert these free users into paying customers, and this has now been expanded to more than a hundred countries around the world, including Germany, in the past quarter.
Netflix is now charging customers who want to share their accounts outside of the home a monthly fee. As an alternative, former free users can take out their own subscriptions and transfer their previous profiles. The company now says it’s seeing a “healthy conversion” from former free users to paid customers. The number of cancellations is low and is being exceeded by new subscriptions. In all regions, sales are now higher than before the changeover.
Amid increased competition and declining subscriber numbers, Netflix initiated yet another change of strategy last year: In the fall, it introduced a cheaper subscription that allows users to see advertising, which costs €4.99 in Germany. The company now said that the number of subscribers for this advertising-financed variant and also the advertising revenues were still low. But it expressed confidence in making advertising a billion-dollar business.
Why Netflix could benefit from the Hollywood strike
An additional challenge for Netflix and its competitors in the entertainment industry right now are strikes in Hollywood. The actors stopped work last Friday and the screenwriters have been on strike since May. The labor disputes endanger the supply of new films and television series.
However, Netflix is still considered to be comparatively well positioned. On the one hand, because the streaming service’s lead times are quite long and it should still have new material for the foreseeable future. On the other hand, because it has a strong international presence and has local content produced in many markets. Raj Shah of consultancy Publicis Sapient said: “The longer the strike lasts, the more Netflix will gain over competitors because of its extensive library of content and its global production, which is unaffected by the strike.”
Published/Updated: Dennis Kremer Published/Updated: , Recommendations: 24 Roland Lindner, New York Published/Updated: , Recommendations: 4
In its quarterly report, Netflix even mentioned a positive effect of the labor disputes — at least in the short term — because it’s expected to reduce spending on content production. The company has raised its forecast for free cash flow this year from at least $3.5 billion to at least $5 billion, citing the strikes among other things.
Netflix was able to increase its net profit by 3 percent to just under $1.5 billion in the past quarter. Netflix is considered one of the few profitable streaming services.
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