Netflix reported that they have lost nearly one million subscribers in the most recent quarter, but the platform might see this as a win. In fact, after the report dropped, investors rushed in to power up the stock by nearly 8 percent in after-hours trading. So, why is losing that amount of users a good thing?
Earlier this year, Netflix reportedly expected to lose two million subscribers for the three-month period that ended on 30 June. This was after it was revealed that—for the first time in a decade—Netflix lost subscribers. For the first three months in 2022, they lost 200,000 overall.
The company attributed its subscriber loss to a number of factors—including a slowdown in the adoption of broadband and smart TVs, password sharing among households, and increased competition from other emerging streaming services. They also blamed increased inflation and Russia’s invasion of Ukraine, which prompted Netflix to shut down its service in Russia.
After only a loss of 970,000 paying customers, leaving Netflix with a bit less than 221 million subscribers, it’s not as bad as they expected. Shares also surged in after-market trades that followed release of quarter earnings figures—which is a sign investors are remaining faithful. However, analysts remarked that the results were still troubling.
“Netflix’s subscriber loss was expected but it remains a sore point for a company that is wholly dependent on subscription revenue from consumers… unless it finds more franchises that resonate widely, it will eventually struggle to stay ahead of competitors that are after its crown,” said analyst Ross Benes.
Netflix has been investing heavily in original content such as Squid Game and Stranger Things to compete with competitors like Disney with its Marvel and Star Wars franchises. According to the company, the recently released fourth season of Stranger Things racked up 1.3 billion hours of viewing in just four weeks at Netflix—making it the platform’s biggest-ever English language television release.
Earlier this month, Netflix also announced that they are working with Microsoft to launch a streaming plan with ads. They’ve announced that they’ve been considering introducing this option since April, after the first drop in subscribers.
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