After Netflix lost subscribers for the first time in more than a decade last quarter, Company’s second quarter earnings report revealed that the number of global subscribers has fallen by 1 million, including a 1.28 million drop in the US and Canada alone between the end of March and the end of June. That’s better than the 2 million loss forecast worldwide, but the subscriber shortfall in the US and Canada is double the 600,000 drop it reported for the first quarter. Netflix now reports that it has 73.28 million paid subscribers in the US and Canada and 220.67 million worldwide.
This comes nearly a week after Netflix announced a partnership with Microsoft on its cheaper, ad-supported tier it expects to launch early next year. In the letter, Netflix emphasizes that its current plans remain ad-free. Netflix executives remain optimistic about the prospect of an ad-supported tier, noting that “over the long term, we believe that ads can enable significantly increased membership (via lower prices) and profit growth (via ad revenue). ”
The plan is to roll it out in the markets where advertisers spend the most money first. Netflix executives write, “Our hope is to create a better-than-linear TV advertising model that is more seamless and relevant to consumers, and more effective for our advertising partners.” Netflix adds that viewing time has also increased. It points to a study by research firm Nielsen that found Netflix’s share of U.S. TV viewing rose to a record high of 7.7 percent in June 2022, compared to 6.6 percent in June last year.
Sales increased 9 percent year over year from: $7.3 billion in 2021 to $7.97 billion this quarter. While the streamer has had a few issues in recent months, including two separate layoffs that affected hundreds of employees, there was some good news. The release of season 4 of Weird stuff elevated the series to the second most-watched show on the service, behind the Korean-language hit squid game, which Netflix announced in June, will return for a second season. Netflix’s earnings report also revealed that the company has acquired Animal Logic, the animation studio behind The Lego movie.
An ad-supported tier is just one avenue Netflix is exploring to counter a subscriber dip; it’s also part of the company’s efforts to hold on to those it already has. But Netflix is also looking to bring in non-paying subscribers, and it partially blamed password sharing for its initial drop in subscriber numbers in the past quarter.
Netflix execs say they are working to find an “easy-to-use paid share” that it aims to launch in 2023. In March, Netflix rolled out tests in Chile, Costa Rica and Peru that should allow users to add subaccounts for users who are outside the primary account holder’s household. Netflix expanded its efforts to curb password sharing this week and began allowing users in Argentina, El Salvador, Guatemala, Honduras and the Dominican Republic to buy an additional “home” located outside the primary household, where they can watch Netflix. can be used on all devices.
Perhaps one of the biggest threats Netflix faces is increasing competition from newer players in the streaming industry, such as Disney Plus, Paramount Plus, and HBO Max. Last quarter, Paramount Plus subscribers grew to nearly 40 million, HBO and HBO Max added 13 million additional subscribers, and Disney Plus also gained 8 million new users. Disney Plus already has plans to launch an ad-supported tier later this year and will also use live streaming for select series such as Dancing with the stars — something Netflix is currently testing.
Netflix will likely reveal more information during a earnings video call that will take place at 6 p.m. ET on its Investor Relations YouTube Channel.
Revelation: The edge recently produced a series with Netflix.