Netflix added millions of subscribers in the second quarter and posted healthy revenue growth, the company said in its rosy earnings call Wednesday. The earnings report comes as the entertainment industry grapples with a double attack inspired in part by the economics of streaming.
Netflix added 5.9 million subscribers, bringing its global subscriber base to 238 million. Revenue rose 3% year-over-year to $8.2 billion, and profit for the quarter was $1.5 billion, currently in line with last year, the company said.
This result can be attributed to two policies introduced last year after Netflix. First Reported Loss of Subscriber Ten years later: Crackdown on password sharing and relatively new ad layers.
The company said it had little resistance to cracking down on password sharing. The company noted that revenue in each region where its service is available is now higher than it was before the sharing restrictions came into force, with new subscriptions already outstripping cancellations.
A new layer of advertising provided by Netflix introduced The November service is still a small part of the company’s business, but Netflix said it believes it will continue to grow. Ad-supported tier membership has doubled since the first quarter.
“We have made steady progress this year, but we still have work to do to reaccelerate growth,” the company said in a letter to shareholders. “We continue to focus on creating a steady drumbeat for must-see shows and movies; improve monetization; increase the enjoyment of our games;
Comcast, Warner Bros. Discovery, Paramount Global and Disney all plan to announce earnings in the coming weeks. But Netflix’s optics are particularly complex. Netflix is lots of harsh words Opinions surrounding the strike are mostly from writers who argue that the economic climate of the streaming age is eroding their working conditions and undermining their overall pay.company already fighting Shareholders were angry last month when they voted to reject a hefty salary package for the company’s executives.
Netflix said little about the strike, other than citing the writers’ and actors’ union and saying it had cut the total amount of cash it planned to spend on content this year due to the “timing of production start and the ongoing WGA and SAG-AFTRA strikes.” The company acknowledged that its free cash flow outlook for 2023-2024 may “create some volatility” as there is no guarantee when production of films and series will resume.
Some Netflix productions were able to finish before the actors’ strike began last week. Other notable series such as ‘Big Mouth’, ‘Cobra Kai’ and ‘Stranger Things’ were all scheduled for production but were canceled due to an unfinished script. In the case of Stranger Things, series creators Matt Duffer and Ross Duffer chose to stop filming because they were unable to continue writing while on set.
“I can’t stop writing when the shooting starts.” they wrote Twitter in early May.
The company has already benefited to some extent from the strike. Netflix reported last month that it would license original HBO shows like “Insecure,” “Band of Brothers,” “The Pacific,” “Six Feet Under,” and “Ballers” from WarnerMedia.
Analysts expressed enthusiasm about the changes Netflix has made to its business, with subscriber numbers on the rise and profits stabilizing.
“Netflix’s quarterly results show the streaming company has a clear path to accelerated growth in both revenue and earnings and is executing it well,” said senior analyst Jesse Cohen. A report from Investing.com said: He warned that in the face of “saturation in the streaming industry and the variety of options available, and the fact that pricing is not always significantly below competitors,” it will be difficult to maintain the pace of growth.
Also of concern to some analysts is the fact that the short-term gains the company is likely to achieve from the strike could become a problem if the strike lasts longer. “However, in the long term, a strike could create a scenario of massive churn and reduced ad revenue for streaming companies,” said Scott Purdy, US national media industry leader at KPMG.
But some are optimistic about Netflix’s advertising business, which is still in its early stages.
“We have everything advertisers want,” said Bank of America analyst Jessica Leif Ehrlich. “They have reach, they have scale, they have premium video content. They are very creative and have come up with some very innovative offerings, like offering advertisers to be in the top 10 weekly shows.
Netflix also announced Wednesday that it’s ditching its $9.99 ad-free “Basic” plan in the US and UK. Consumers who subscribe to this plan will be able to continue using it, but new subscribers will have to choose between an ad-supported plan for $6.99/month or two ad-free options for $15.49 or $19.99/month.
Unlike traditional entertainment companies, whose stocks have fallen since the writers’ strike began in May, Netflix’s shares are up about 50% to $477.59 at the close of the market on Wednesday.