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Monday, March 13, 2023

Netflix loses almost a million subscribers

The shares of the streaming giant grew 5.61% at the end of Tuesday, after presenting the financial results for the second quarter of the year.

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Declan Foster
Declan Foster
I'm Declan Foster, and I write about information technology and politics. I'm certified in cybersecurity and networks.
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After a disastrous start to the year, the second quarter of 2022 brought good news for Netflix.

Although in the period between April and June, the company lost 970 thousand subscribers, the figure was much lower than expected. Netflix had predicted in April that during the second quarter, it would lose two million subscribers, which dropped its shares 35% at the time. 

It should be remembered that in the first quarter, the company registered a decrease of 200 thousand subscribers, derived mainly from the departure of Russian clients after the invasion of Ukraine.

According to its latest financial report, the streaming giant currently has 220.67 million subscribers worldwide. Netflix now estimates its new subscribers between July and September to number 1 million; this is 840 thousand less than Wall Street expected, according to analysts surveyed by Refinitiv.

Following the announcement of the results, Reed Hastings, co-CEO of Netflix, admitted that “it’s hard to lose a million [subscribers] and call it a success” but reiterated that the company is “very well prepared for the coming year.”

Shares of the streaming company closed Tuesday higher to settle down 5.61% at $201.63. After the close, its shares rose to 7.85%.

Santosh Rao, head of research at Manhattan Venture Partners, said, “the game has changed” when it comes to the streaming landscape, noting, “we can’t compare [subscriber numbers] to the past; things are different.”. “

On the other hand, other experts have taken the company’s latest report with reservations, pointing out that there are still important red flags for the following quarters. 

“Things don’t seem so healthy if you look at Netflix subscriber figures geographically. The only area where Netflix showed real growth was Asia Pacific, which has a smaller presence than other places. In its two largest regions, North America and Europe, the Middle East and Africa, Netflix’s subscriber losses increased significantly.

In North America, for example, Netflix lost 1.3 million subscribers, roughly double the loss in the first quarter,” said Martin Peers, columnist and technology expert at Bloomberg.

Netflix ad-supported plan coming in 2023

One of Netflix’s big bets is in advertising. The company plans to launch a new subscription with ads for a lower price in early 2023.

For this project, Netflix recently announced that it would work with Microsoft as a technology and sales partner, which is also looking to expand its advertising business. Given the potential for a premium CPM from advertisers and the mix of our engaged audience and top-notch content, Netflix expressed excitement about the proposition.

We’ll probably begin in a few locations where advertising expenditures are substantial. Like most new initiatives, we intend to implement them, listen and learn, and quickly iterate to improve the offering. So, our ad business will probably look very different in a few years than it does on day 1.

In the long term, we believe that advertising can enable us to increase our membership base to the level of advertisements and accompanying ad income. a membership substantial incremental growth (via lower prices) and earnings growth (via ad revenue),” the company added.

Geetha Ranganathan, an analyst at Bloomberg Intelligence, pointed out that Netflix has several things in its favor compared to other platforms that already show ads in their content. They have 220 million users and an average watching time of two hours daily, making them the largest platform.

That’s what advertisers are looking for. Netflix should be able to charge pretty robust rates. If Roku or Hulu charges a CPM of 30 or $40, Netflix should eventually be able to charge 50 percent more than that because of the quality of the audience and what they can offer.” 

It will increase the fight against the sharing of passwords

Since the beginning of the year, Netflix has started a campaign to prevent its users from sharing the password of their accounts with more people and thus force them to pay for the service. According to the company, around 100 million households do not pay directly for content.

The company’s first experiments have already been applied in some regions of South America, with mixed results. “To find out more, we have started two specific initiatives in Latin America. Our goal is to find an easy-to-use shared payment offer that we believe works for our members and business that we can implement by 2023,” the company said.

In March 2022, Netflix launched an “add additional member” feature in Chile, Costa Rica, and Peru. Starting in August, it will launch an alternative “add a house” feature in Argentina, the Dominican Republic, El Salvador, Guatemala, and Honduras.

This second alternative will allow the account to be linked to a house. Every Netflix account, regardless of your plan, will include a home where you can enjoy Netflix on any device. 

To use the Netflix account in other houses, the user must pay an extra ($2.99 ​​per month). Members of the Basic plan may add one extra house, Standard members may add up to two, and Premium members may add up to three.

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