(San Francisco) Netflix again lost subscribers in the second quarter but less than expected and, above all, it is betting on a rebound this summer, giving hope to investors who feared a free fall for the online streaming giant.
Posted at 4:28 p.m.
Updated at 6:33 p.m.
The pioneer of the sector announced on Tuesday that it had lost 970,000 subscribers between the end of March and the end of June, instead of the two million it expected.
The service, which now has 220.67 million paying subscribers worldwide, was largely disappointed when it admitted to losing subscribers for the first time in a decade in the first quarter.
A sign that Tuesday’s news reassured the market, its stock rose more than 8% in electronic trading after the close of the New York Stock Exchange.
The Californian group published a turnover of 7.97 billion dollars for the period from April to June, a result lower than expectations, which it put in particular on the account of an unfavorable exchange rate.
On the other hand, it made 1.44 billion in net profit, better than expected.
These performances “show that Netflix is not likely to put the key under the door for the moment”, reacted the independent analyst Rob Enderle.
“They have saved time, which they need to stop the bleeding” of subscribers, he continued.
Netflix expects to regain one million subscribers in the third quarter and thus reach 221.67 million paying subscribers. A figure nevertheless still below that of the end of 2021.
Leader threatened
The pioneer of the sector is undoubtedly counting, to achieve this, on the success of the fourth season of the series of science fiction and adolescent adventures Stranger Thingswhich has just ended.
And also on the imminent release of The Gray Mana film by the Russo brothers, the directors of Avengers: Endgamewhich could turn into a franchise if it wins over the public.
“With 1.3 billion hours on the clock for season 4 of Stranger ThingsNetflix’s ability to produce successful content is not in question,” noted Neil Saunders, Director of GlobalData.
But “the Netflix model is not as relevant to generating growth in a changing economy and consumer society,” he added.
After years of rapid conquest, and after taking full advantage of the pandemic and health restrictions, Netflix is undergoing a correction effect, amplified by competition, which has saturated the market in recent years.
Added to the loss of subscribers is an unfavorable economic context, from the war in Ukraine to inflation and the strong dollar.
“Netflix remains the leader in digital streaming, but unless it finds more franchises that resonate widely, it’s going to end up struggling to stay ahead,” commented eMarketer analyst Ross Benes.
Belt tightening
In the first quarter, the service had lost 200,000 subscribers worldwide compared to the end of 2021. The news had plunged its stock price by 25%.
The bosses of the platform then announced, in April, their intention to offer a cheaper subscription formula but with advertising, after years of refusing this less prestigious solution.
“Given the strong demand from brands, this product should increase their revenue per user. But there is no evidence that this will slow subscription cancellations or attract enough new consumers,” said Ross Benes.
Last week, the company clarified that the new subscription would be added to the three options already available (“Essential”, “Standard” and “Premium”), the cheapest being ten dollars per month in the United States.
The group also announced that Microsoft would be responsible for designing and managing the platform for advertisers wishing to broadcast advertisements on the very popular service.
In April, Netflix had also indicated that it was going to tighten the screw on the side of the sharing of identifiers and passwords, which allow many people to access the content of the platform without paying.
The slowing growth of the platform has also resulted in layoffs: more than 400 employees were laid off during the past quarter, mainly in the United States.