Netflix was expecting a tough second quarter with a steep decline in paid subscribers but today’s financial report revealed a picture much less bleak than feared. Between April and June, the platform lost 970,000 memberships instead of the expected 2 million. This lead to a 7% increase in share prices in after-hours trading.
The cheaper ad-supported tier is expected in early 2023, and the same deadline applies to clamping down on the 100 million households that do not pay for the service, but use shared passwords.
Losing 1 million paying customers might be a big blow for the company on paper, but its revenue still grew 8.6%. Netflix revealed this was done by an increase in average paid memberships and ARM (Average Revenue per Membership). The number would have been even higher but Netflix lost $339 million due to foreign currency impact.
As the company strengthens its positions in global markets the strong dollar negatively affects its dollar-denominated results. Netflix also warns of the challenges ahead and informed investors of short-term and long-term steps that will increase sales.
The company’s forecast for Q3 2022 sees the number of subscribers grow by 1 million, compared with 4.4 million in Q3 2021.
Bringing Microsoft on board for the ad-supported tier is key for Netflix and the plans are to introduce the new plan in “early 2023”. It will arrive first in markets where people tend to spend more and once Netflix learns how the new plan is working, will expand to other regions. This would bring more paying subscribers on board, the company hopes.
We already reported next year would be the year Netflix is finally going to deal with password-sharing subscribers. According to the report, over 100 million households are not paying, on top of the already 200 million paid accounts. Once the company decides which method to use, it will implement the new plans and features.