On the heels of its first subscriber losses in more than a decade, all eyes were on Netflix on Tuesday as the company reported its second-quarter results.

The Umbrella Academy performed well for Netflix in the last quarter
For years, Netflix’s financial results have been a focal point of every earnings season, but anticipation was at an all-time high this time around to see how the streaming giant would respond to losing 200,000 subscribers.
The results were better than expected, with Netflix down by around 970,000, compared with an anticipated loss of two million, but there was plenty to unpack from the post-earnings investor call with Netflix’s management team.
Here are seven key takeaways from one of the most consequential quarterly earnings reports in the history of the streaming business.

Spencer Neumann
1) Netflix’s content spend will remain at US$17bn for the next few years
A major question about Netflix’s stock-price crash has been the degree to which it will impact its annual content spending. That question was answered by Netflix chief financial officer Spencer Neumann, who said the annual content budget for original productions and acquisitions will hover around the US$17bn mark for the next two or three years.
“I’d say, generally, when we look at the next couple or few years, we’ll probably be right in that zip code,” said Neumann, noting that Netflix’s content spend will be “more moderated” in the future and that the company has “gotten a lot smarter over the last decade or so.”
Co-CEO and chief creative officer Ted Sarandos added: “We’ve spent the way we’ve spent to get to where we are today.”
2) The results satisfy Wall Street (for now)
As much as the other major studio groups hate to admit it, Netflix’s success is good news for everyone in the streaming business. Ahead of Tuesday’s second-quarter results, observers and analysts were batting around plenty of doomsday scenarios about Netflix and the future prospects of streaming. None of those came to fruition and there will have been big sighs of relief in boardrooms across LA.

Ted Sarandos
Indeed, Disney, Warner Bros Discovery and Paramount Global all saw their stock prices increase modestly on Tuesday as Wall Street’s concerns about the economics of streaming seemed to have been allayed, even if temporarily.
That said, chairman and co-CEO Reed Hastings made sure not to hail the Q2 results as a win, saying: “[It’s] tough, in some ways, losing a million [subs] and calling it a success. But really, we’re set up very well for the next year.”
If there was a single reason that Netflix beat expectations, Hastings said it was the traction gained by the fourth instalment of sci-fi hit Stranger Things. “But again, we’re talking about losing one million instead of losing two million, so our excitement is tempered by the less bad results,” he said. Elsewhere, Netflix said The Umbrella Academy and The Lincoln Lawyer were strong performers.
3) Hastings predicts the ‘end of linear’ within 10 years
Netflix’s recent woes have put a spring back in the step of some of America’s linear networks, with some execs at May’s Upfronts keen to rub a little salt into the wounds.
At the start of the post-earnings call, Hastings wasted no time declaring that the “end” of the linear television business is on the horizon as consumers of all age groups continue to migrate to streaming.
“Looking forward, streaming is working everywhere. Everyone is pouring in. It’s definitely the end of linear TV over the next five, 10 years, so we’re very bullish on streaming,” he said.

Reed Hastings
4) Ads are likely to arrive on Netflix in early 2023
After years of shunning the prospect of ads, Hastings’ stunning revelation that Netflix would introduce an AVoD tier sent tremors through the streaming business in April. The pieces have started to fall into place over the past month, with Netflix last week announcing that Microsoft would be its exclusive tech and ad partner.
On Tuesday, Netflix confirmed that it is aiming to begin rolling out its AVoD tier in early 2023, starting with a few select markets, before taking the ad-supported tier global. While it’s still early days, brands are intrigued by the prospect of Netflix’s entry into the ad market, according to execs.
“We’ve seen a lot of excitement in our early discussions with brands, holding companies and agencies, because they’ve wanted to connect with the titles and content that Ted’s team is putting out there,” said chief operating officer and chief product officer Greg Peters.
If Nielsen’s data is anything to go by, Peters might have a point. New data from Nielsen indicates that Netflix’s share of viewing time in the US climbed to an all-time high of 7.7% in June, up from 6.6% in June 2021. In addition, during the 2021/22 broadcast season, Netflix said it drew 1.33 trillion hours of watch time – much higher than the next most-watched networks, CBS (753 billion hours) and NBC (597 billion).
5) Renegotiating licences won’t limit AVoD ambitions
Introducing an AVoD tier was never going to be a small feat, and one of the major potential headaches is that certain licensing deals will need to be renegotiated with content providers for an AVoD environment.

Greg Peters
When asked whether it would create issues, Sarandos dismissed the idea, saying: “Today, the vast majority of what people watch on Netflix we can include in the ad-supported tier.”
He added: “We will clear some additional content but certainly not all of it,” and revealed Netflix is in conversations with several studios about doing so. It will not be a “material hold-back” to the company’s AVoD aspirations though, he said.
6) Can an AVoD tier and password crackdown help stem UCAN, EMEA subs losses?
While global subscriber losses weren’t as significant as anticipated, Netflix will need to address the fact its two most lucrative regions – US and Canada (UCAN) and Europe, Middle East and Africa (EMEA) – have both lost subscribers in successive quarters.
In fact, those losses are accelerating in both markets, with Netflix losing 1.3 million UCAN subs this quarter, compared with 640,000 last quarter. Meanwhile, it lost 770,000 EMEA members in the most recent quarter, compared with 300,000 in Q1.
7) Netflix continues to (relatively quietly) build its M&A strategy
Netflix has historically not been one for splashy acquisitions, but the company is showing an increasing willingness to execute M&A deals that it believes provide strategic benefits.
On Tuesday, the company revealed its acquisition of Australia-based animation studio Animal Logic, which has around 800 employees in Sydney and Vancouver. The move “reinforces our commitment to build a world-class animation studio,” said Netflix, adding that it will “produce some of our largest animated feature films” with the help of Animal Logic.
The deal comes on the heels of its purchase of VFX studio Scanline in November, as well as a trio of acquisitions related to its gaming business.
While M&A remains a small part of its business, it’s a safe bet that Netflix will pursue further acquisitions in the year ahead, and some of its deal-making may get more creative as it expands into new lines of business like gaming and introduces its AVoD tier.