Netflix added 5.9 million new paid subscribers in the second quarter, suggesting its password-sharing crackdown is helping it pick up new customers. The addition of paid users beat Wall Street estimates of 2.1 million, but its $8.2 billion in revenue was still lower than the company had forecast, sending its shares down about 9% in early trading Thursday. Netflix results are seen as a bellwether for the entertainment industry, notes Axios, just as concurrent writers and actors strikes shut down Hollywood productions and streamers grapple with increased competition and a tough ad market.
- Netflix results came hours after Netflix cut its “Basic” $9.99 subscription for new or returning members in the U.S., nudging them to a cheaper $6.99 ad-supported tier or ad-free options priced at $15.49 for “Standard” and $19.99 for “Premium.”
- The actors and writers strikes will reduce costs by $1.5 billion this year.
By Jake Perez, Editor at LinkedIn News
Netflix’s Q2 earnings report paints an intriguing picture as to where the current media business stands as a collective whole. The company reported the addition of an impressive 5.9 million new paid subscribers, considerably surpassing Wall Street’s estimates of 2.1 million. This substantial user growth has largely been attributed to Netflix’s effective strategy of cracking down on password sharing, which has allowed the company to accelerate its customer acquisition.
Despite the substantial user growth, Netflix’s Q2 revenue of $8.2 billion did not meet its projected forecasts, triggering a decrease in share prices by about 6%. Additionally, the company now finds itself in the midst of a challenging landscape as actor and writer labor strikes in Hollywood will make it much more difficult to fill the content pipeline Netflix needs.
In spite of these obstacles, Spencer Neumann, CFO at Netflix, maintains an optimistic outlook. He affirms that, “The key is that we delivered revenue in line in Q2 with our expectations, and we’re on track to accelerate that revenue in Q3 and further accelerated in Q4. That’s really our primary objective around revenue acceleration, and we’re set to deliver on it.”
This sentiment is echoed by analysts such as Steven Cahall from Wells Fargo, who suggests that, “Patience is a virtue. Investors were over-exuberant on paid sharing, and while revenue acceleration will take longer we think it creates an entry point for patient, long-term investors.”
As we look ahead, it will be of great interest to observe Netflix’s future trajectory. This episode underscores the importance of innovation, patience, and strategic adaptation in navigating the complexities of today’s dynamic digital landscape.
Nicole Sperling | The New York Times