Netflix lost a little less than 1 million subscribers in the second quarter — better than expected, the company announced on Tuesday, July 19.
This is the second quarter in a row that saw Netflix shed subscribers, following the 200,000 lost during the previous three-month reporting period. To say this is a hugely consequential moment for Netflix is probably the understatement of the year, given that the streamer is beset by everything from stepped-up competition to perceptions about content quality slipping, revenue lost from password-sharers, and cost-conscious subscribers looking to save money.
Netflix earnings — not as bad as feared (but still not good)
Regarding the latter point, that’s why Netflix also said it plans to launch a lower-cost, ad-supported subscription tier in early 2023. “We’ll likely start in a handful of markets where advertising spend is significant,” Netflix said in its shareholder letter. “Like most of our new initiatives, our intention is to roll it out, listen and learn, and iterate quickly to improve the offering. So, our advertising business in a few years will likely look quite different than what it looks like on day one.”
This news comes just ahead of Netflix, on Friday, debuting the new $200 million Russo brothers spy thriller The Gray Man on the platform. That will be the next opportunity for Netflix to show whether it can power through the headwinds. And continue to deliver big new releases that electrify millions of its subscribers (a la a title like Stranger Things).
READ MORE: Here’s what Netflix’s password-sharing crackdown could look like in the US
Tuesday afternoon’s earnings release, meanwhile, amounted to no less than one of the most anticipated, if not the most important earnings announcement in the company’s history.
Other highlights of the Netflix earnings release:
- A little more than 1 million subscribers lost in the market that includes the US and Canada.
- For the coming third quarter, Netflix is forecasting to return to subscriber additions. A net addition of around 1 million subscribers, compared to 4.4 million subscribers during the year-ago period.
- More than half of the content assets on the company’s balance sheet (60%) are produced internally.
- Netflix on Tuesday also announced that it’s acquiring the 800-person Australian animation studio Animal Logic. The deal is for an undisclosed cash amount.
- Netflix co-CEO Reed Hastings, during a Q2 earnings interview, predicted that the end of linear TV will come possibly as soon as 2027. His streamer, of course, wants to be able to capture those eyeballs once it happens.
Read the entire Netflix letter to shareholders, walking through the latest results, right here.
Top 10 shows
It’s easy to suspect, of course, that if Netflix didn’t have the new season of Stranger Things during the quarter? Things could have been much worse.
Shortly before the company released its quarterly earnings, the streamer also published its latest look at the Top 10 shows on Netflix globally, for the seven-day period that ended July 17. Here they are:
- Stranger Things 4 — 102.3 million hours viewed
- Resident Evil: Season 1 — 72.6 million hours viewed
- Manifest: Season 1 — 38.2 million hours viewed
- Season 2 of Stranger Things — 33.7 million hours viewed
- Stranger Things 3 — 33 million hours viewed
- Stranger Things — 31.5 million hours viewed
- The Umbrella Academy: Season 3 — 27.2 million hours viewed
- Kung Fu Panda: The Dragon Knight, Season 1 — 21.1 million hours viewed
- Boo, Bitch — 20 million hours viewed
- Alone: Season 8 — 15.5 million hours viewed
A final note
Does the surprise improvement in fundamentals mean Netflix is through the worst of the choppy waters? The performance of the stock today would suggest that might be the case. Or, at least, that Wall Street thinks that might be the case.
For the password-sharers out there, however, don’t be so sure that the company doesn’t still have you in its sights. Note the following from the company’s newly-published shareholder letter, emphasis mine: “Our challenge and opportunity is to accelerate our revenue and membership growth by continuing to improve our product, content, and marketing as we’ve done for the last 25 years, and to better monetize our big audience.”
