Netflix said on Wednesday that quarterly revenue and subscriber numbers were up as efforts to curb password sharing took hold.
Here’s what the company reported in the second quarter and what analysts expect, according to Refinitiv.
- Earnings: $3.29 per share, expected $2.86 per share
- Earnings: $8.19 billion vs. $8.30 billion expected
Streaming giant Netflix said it added 5.9 million customers in the second quarter amid a broad crackdown on password sharing in the United States, and on Wednesday said it would roll out a new policy to its remaining customers.
Netflix stock fell as much as 8% in after-hours trading.
The company had revenue of $8.19 billion, up 3% from $7.97 billion in the same period last year. Net income was $1.49 billion, up from $1.44 billion in the same period last year.
The earnings report will come out soon as investors seek more information on the rollout of Netflix’s ad-supported streaming tier and drive subscriber growth by eradicating account sharing.
However, Netflix said it was too early to report a breakdown of revenue from its ad-supported tier. introduced So are accounts created late last year under the new password policy.
Netflix said Wednesday it expects revenue growth in the second half of the year as it begins to see “the full benefits of paid sharing and steady growth in ad-supported plans.”
Netflix said it now expects third-quarter revenue to grow 7% year over year to $8.5 billion. The company believes the expected revenue growth is due to an increase in average paying subscribers.
The company also expects net paying subscriber growth in the third quarter to be similar to the second quarter. Meanwhile, Netflix expects revenue growth to “further accelerate significantly” in the fourth quarter as efforts to curb password sharing gain momentum and advertising revenue increases.
In May, Netflix began warning members about policies that prevent others from using their accounts. Subscribers can transfer profiles to non-family members to pay for their accounts, or members can pay her $7.99 surcharge per person.
Antenna reports that its subscriber base increased in the weeks following the rollout of the sharing policy.
During Wednesday’s earnings call, Netflix executives declined to provide specifics about the rollout of paid sharing initiatives so far.
Co-CEO Greg Peters said Wednesday it would take several quarters for the full effect of the policy to be seen.
“It’s not going to happen overnight,” Peters said by phone. “Partly because of the intervention being phased in, and partly because some borrowers don’t sign up for their accounts right away, but some sign up next month, three months, six months, or even longer as we launch titles that are of particular interest to them.”
Executives noted that password sharers who opened their accounts had similar characteristics to long-time customers, so the company expects: High retention rate.
Netflix introduced both new sharing policies and inventory last year as part of its response to the first drop in subscribers in over a decade in 2022.
Netflix’s stock price rose as the move unfolded. The company’s stock has surged more than 60% this year to a 52-week high. Wednesday, amid growing hopes that growth is expected this quarter.
The company said Wednesday it hopes the change will help it “generate more revenue from a larger base,” adding that it hopes to use the additional funds to reinvest in its platform.
Netflix announced in May that it was expanding its paid sharing policy to more than 100 countries, accounting for more than 80% of its revenue.
Netflix said Wednesday that it was “low cancellation response and is in the early stages of monetization, but there is a healthy conversion of renter households to full Netflix memberships,” adding that it will address the issue in the remaining countries where it is available.
Media companies, on the other hand, turned around The use of ad-supported streaming will become even more important as a means of increasing profitability.
Netflix gave few details about its ad-supported tier when it pitched to advertisers in May, but that was enough to boost its stock price. The new tier has five million active users, according to the company, with 25% of new customers signing up for the tier in regions where it’s available.
Wednesday, Netflix confirmed it It was deleted At $6.99 per month, the standard plan with ads is the cheapest option as it is the “Basic” plan without ads. The commercial-free Standard and Premium tiers cost $15.49 and $19.99 per month, respectively.
These efforts come at a time when the media industry is going through its most difficult times. Noisy For a while.
Industry analysts have long suspected the industry could consolidate, especially through mergers and acquisitions.
On Wednesday, co-CEO Ted Sarandos said Netflix is looking at opportunities to buy intellectual property and build out its content library.
“Some of these assets are under pressure for a reason,” Sarandos said of potential media companies and assets for sale. “His M&A activity at our company is primarily about IP that can be developed into great content for our members. Traditionally, we are much stronger as a builder than a buyer, and that hasn’t changed.”
Analysts expect Netflix to fare better than other media companies during the shutdown, especially because of its wealth of content from international sources.
As a result of the strike, Netflix has raised its 2023 free cash flow forecast to $5 billion from a prior forecast of at least $3.5 billion, citing lower spending on content this year.
Sarandos said on Wednesday’s conference call that Netflix has a lot of new content in store, but didn’t say how long the streaming will last. not yet, He said the strike had to come to a conclusion.
“There’s a lot of work to do. There are some complex issues,” Sarandos said. “We are committed to reaching agreements as soon as possible that are fair and allow the industry and all of its stakeholders to move forward in the future.”