Netflix has said that its subscriber losses in the last quarter were much lower than projected, sending the streamer’s stock up in after-hours trading.
In its second quarter earnings report on Tuesday, Netflix posted a loss of 970,000 global subscribers, versus the company’s prior forecast of a loss of 2 million.
The streaming giant also projected that it will add 1 million subscribers in the current quarter, sending its stock up as much as 8 percent in extended trading.
Analysts who had anticipated the smaller subscriber losses pointed to the streamer’s popular series Stranger Things, which released a new season in two parts — one at the end of the second quarter, and one at the end of the third.
The staggered release strategy was widely seen as a means of preventing users from subscribing just to watch the show and quickly cancelling their membership.
In its second quarter earnings report on Tuesday, Netflix posted a loss of 970,000 subscribers
Analysts who had anticipated smaller subscriber losses pointed to the streamer’s popular series Stranger Things , which released a new season in two parts
Netflix also reported that quarterly revenue grew 9 percent from a year ago, to $7.97 billion, missing expectations. Profits of $3.20 per share were up 7 percent from a year ago and beat expectations.
The company also revealed that it plans to unveil its cheaper ad-supported option by early next year. Microsoft was recently tapped as a partner in the ad-supported offering.
‘We’ll likely start in a handful of markets where advertising spend is significant,’ Netflix explained in a statement.
‘Like most of our new initiatives, our intention is to roll it out, listen and learn, and iterate quickly to improve the offering.’
Though Netflix stock jumped on the latest earnings results, the company’s shares remain down more than 66 percent from the beginning of the year.
Netflix remains the dominant global streaming platform and reported a total of 220.67 million paying subscribers at the end of the second quarter.
Netflix stock jumped up as much as 8 percent in extended trading on Tuesday
Though Netflix stock jumped on the latest earnings results, the company’s shares remain down more than 66 percent from the beginning of the year (seen above)
‘The stock is up because (analyst) downgrades all made a big deal out of slowing growth,’ Wedbush Securities analyst Michael Pachter said, noting that Netflix was cutting costs and expected free cash flow to grow substantially next year.
After years of red-hot growth, Netflix’s fortunes changed as rivals including Disney, Warner Bros Discovery and Apple invest heavily in their own streaming services.
In a letter to shareholders on Tuesday, Netflix said it had further examined the recent slowdown, which it had attributed to a variety of factors including password-sharing, competition and a sluggish economy.
‘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,’ the letter said.
One way it plans to earn more from members is by cracking down on password-sharing. The company recently announced that it is testing solutions to the issue in Latin America.
Reed Hastings, co-CEO of Netflix, is seen above. The company plans to earn more from members by cracking down on password-sharing
The streaming service will ask subscribers in five Latin American countries to pay an additional fee if they are consistently using the platform in a different household.
Users in El Salvador, Guatemala, Honduras, the Dominican Republic, and Argentina will receive a notification on their account if it has been used for more than two weeks outside of their primary residence.
They will be asked to fork over an additional $2.99 ($1.70 in Argentina) on top of their regular subscription for the ability to continue watching at that different location.
The additional fee will not apply to users watching on mobile devices, including laptops, phones, and tablets.
The move has the potential to make or break Netflix, which has been struggling to find a way to shore up its plummeting profits while maintaining its subscription based revenue platform.
Analysts have said that Netflix is doing everything it can to avoid subjecting users to advertisements or selling their data, but many predict it is only a matter of time before the firm is forced to turn to that.