Netflix makes unexpected comeback after success of hit shows Stranger Things and Dahmer

Netflix made an unexpected comeback in the third quarter of this year, after the success of series such as Stranger Things and Dahmer.

Executives at the streaming giant announced Tuesday that the platform added 2.4 million subscribers between July 1 and September 30, after losing subscribers for two consecutive quarters. That’s more than double what Wall Street expected.

Netflix also surpassed Wall Street projections with revenue of $7.9 billion, up 6 percent from a year earlier.

That profit was $3.10 a share, after the company’s stock prices fell nearly 60 percent over the year.

But the shares are now up 14 percent in after-hours trading, boosted in part by the streaming service’s prediction that it would attract another 4.5 million customers in the fourth quarter.

However, Netflix expects fourth-quarter revenue to fall again to $7.8 billion due to ongoing inflation.

The gains come after Netflix released the final episodes of the fourth season of its sci-fi hit Stranger Things, as well as its new serial killer series Dahmer-Monster: The Jeffrey Dahmer Story, which became one of Netflix’s most-watched series of all. times.

“Netflix’s impressive numbers show that the company’s growth story is far from over,” said Investing.com analyst Haris Anwar, as Wall Street investors question whether streaming platforms can continue to drive subscriber gains despite fears of a recession.

The report comes as Netflix executives work to reinvigorate membership growth after a sudden decline in the first half of the year, when the company’s subscriber base shrank by a staggering 1.2 million people.

It now has a total of 223.1 million subscribers worldwide, with much of its profits coming from the Asia-Pacific region, where the streaming service gained 1.4 million subscribers, according to The Hollywood Reporter.

And in Latin America, the streaming service gained 310,000 subscribers, while Netflix gained 570,000 subscribers in the Europe, Middle East and Africa region.

But in the United States and Canada, Netflix posted only modest gains of 100,000 subscribers as the market matures and newer market participants — like Paramount+ — attract more subscribers because they offer live sports programming.

However, in their quarterly letter to shareholders, Netflix executives noted that rival media companies are losing money on streaming as they try to attract viewers.

For example, companies like Disney run multiple businesses including television networks and theme parks to offset streaming losses.

“Our competitors are investing heavily to drive subscribers and engagement, but it’s hard to build a large, successful streaming business,” the letter reads.

It estimated that competitors would end 2022 with combined operating losses of “well over $10 billion,” compared to Netflix’s annual operating profit of $5 billion to $6 billion.

But Netflix’s losses this year have led to massive layoffs at the company as it pulled back its spending growth.

It also forced the company to add ads for the first time, with Netflix now offering an ad-supported tier on November 3 for $7 a month.

To do this, the Hollywood Reporter reports, executives have already signed a deal with Microsoft to power the ad technology and have appointed Snap chief business officer Jeremi Gorman and vice president of sales Peter Naylor to lead the initiative.

They also signed an agreement with Nielsen in the United States and the nonprofit BARB in the United Kingdom to measure viewership and encourage advertising.

PP Foresight analyst Paolo Pescatore said he expected some of Netflix’s current subscribers to switch to the cheaper plan.

“Some will downgrade or decide to return to Netflix,” Pescatore said. “The move is about both retaining users and signing up new ones.”

Another analyst, Michael Pachter of Wedbush, saw the ad-supported layer as a tool for Netflix to reduce churn by offering price-sensitive subscribers an alternative to canceling the service.

Disney, Warner Bros Discovery, and other companies also offer or plan to offer ad-supported options.

At the same time, Netflix is ​​cracking down on account sharing, announcing Monday that it will allow users to transfer their profiles to new accounts.

That means favorites, recommendations, and viewing history are preserved when profile owners start their own Netflix account.

Netflix said the “in-demand” feature is now rolling out to all users around the world and an email will be sent as soon as it’s available for each account.

And in their letter to shareholders on Tuesday, company executives described the profile transfer as a “thoughtful approach to monetizing account sharing” that allows both the profile transfers and primary account holders to add “sub-accounts” if they want to pay for family. and friends.

While Netflix is ​​making several changes to fuel growth, the company said it remained committed to producing original programming while releasing all episodes at once to allow for binge-watching.

“We believe that our members’ ability to immerse themselves in a story from start to finish increases their enjoyment, but also their chance to tell their friends, meaning more people watch, join and stay with Netflix. the company said.

There are now 35 games available to play, including titles based on The Queen’s Gambit, Nailed It! and Money Heist, and has 55 more games in development.

A new season of British royalty drama The Crown and a sequel to the 2019 film Knives Out will also be released in the fourth quarter.

Netflix said it would stop providing guidance to new customers from January, a key indicator for Wall Street. The company will continue to release forecasts for revenue, operating income and other metrics.

“We are increasingly focused on revenue as our primary topline metric,” the company said.