In the second quarter, Netflix’s earnings fell short of expectations. It reported losing about 1 million subscribers globally in the quarter, marking the second quarter in a row that it has lost customers. In the last five quarters, it lost 1.3 million of its users in the U.S. and Canada, making this the third time that it has lost its most profitable subscribers based on average revenue per user.
According to data from StreetAccount, Netflix forecast it will add just 1 million new subscribers to its rolls in the third quarter – below the 1.8 million new customers analysts had anticipated. Even if Netflix adds 1 million new subscribers next quarter, it will still lose subscribers so far this year. Comparing that to analyst estimates of nearly 20 million net additions earlier this year.
Despite this, Netflix shares rose by over 6% after hours. In the quarter, the company was expected to lose 2 million subscribers. The decline of 1 million is still preferable to what it would have been without.
Investor’s opinion of the company is probably due to the company’s solid, future-looking plan to be revitalized — a plan that won’t begin to work until 2023.
The company announced its ad-supported service will debut in the early part of 2023. In 2022, Netflix hoped to debut the cheaper tier that would eventually be launched in late 2022, according to the New York Times report.
Netflix also revealed its strategies for stopping password sharing in its quarterly shareholder letter, stating that it has implemented two distinct strategies in Latin America 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.”
Netflix added, “We’re encouraged by our early learnings and ability to convert consumers to paid sharing in Latin America.”
With a brief pep talk, the company concluded its shareholder letter. Investors seem to be paying attention to the chief coaches Reed Hastings and Ted Sarandos.
“Reaccelerating our revenue growth is a big challenge,” the company said in a letter. “But we’ve been through hard times before. We’ve built this company to be flexible and adaptable and this will be a great test for us and our high performance culture. We’re fortunate to be in a position of strength as the leader in streaming entertainment by all metrics (revenue, engagement, subscribers, profit and free cash flow). We’re confident and optimistic about the future.”