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Netflix 970,000 subs loss beats expectations as it readies AVoD tier for 2023 launch

Stranger Things S4 was Netflix’s biggest season of English-language TV

Netflix lost around 970,00 subscribers in the second quarter, beating its own forecast of two million losses, and predicted that it will return to growth in the forthcoming quarter with roughly one million additions.

The streaming giant now has 220.7 million global subscribers, down from 221.6 million, with quarterly revenue falling to US$7.84bn from US$7.97bn in the previous quarter.

Netflix lost the greatest number of subs in the US and Canada (UCAN), its most lucrative market, with its total dipping by 1.3 million to a total of 73.3 million. In the prior quarter, it lost 640,000 members in UCAN.

It also lost around 700,000 subs in Europe, the Middle East and Africa, with its total now sitting at 72.9 million in the region.

There were bright spots in Asia-Pacific as Netflix added 1.08 million to reach a total of 34.8 million, while subs remained steady in Latin America, rising by around 10,000 to 39.62 million.

While Netflix’s subscriber numbers might be stalling, its share of viewing time in the US climbed to an all-time high in June, according to Nielsen data supplied by Netflix.

The data indicated that its viewership share reached 7.7% last month, compared with 6.6% in June 2021. 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) and NBC (597 billion).

The streamer also confirmed that it intends to roll out its new ad-supported tier in 2023, in partnership with its technology and sales partner Microsoft. Netflix said it plans to begin the roll-out in a “handful of markets” before tweaking it and taking it global with the goal of creating a “better-than-linear-TV advertisement model that’s more seamless and relevant for consumers.”

“While it will take some time to grow our member base for the ad tier and the associated ad revenues, over the long run, we think advertising can enable substantial incremental membership (through lower prices) and profit growth (through ad revenues),” said Netflix.

News of the better-than-expected performance sent the company’s stock price up 7% to US$201 per share in after-hours trading.

In terms of viewership, the fourth instalment of Stranger Things performed well for Netflix in the most recent quarter, generating 1.3 billion hours viewed in its first 28 days, making it the biggest season of English-language TV ever on Netflix.

The streamer also highlighted season three of The Umbrella Academy (284 million hours), The Lincoln Lawyer (277 million), UK drama Heartstopper (67 million) and reality series The Ultimatum (148 million) and Selling Sunset (95 million).

In the previous quarter, Netflix lost around 200,000 global subscribers, marking the first time its membership had declined in more than a decade.

The subscriber loss, combined with the expectation that it would lose a further two million in Q2, sent its shares plummeting to the lowest levels since 2017, eradicating the huge gains it made during the pandemic.

For the past two months, Netflix shares have been trading below US$200, in stark contrast to last autumn when the stock was trading as high as US$700 per share.

It has also made several rounds of lay-offs in recent months, most recently axing 300 positions in the US and internationally. In recent months, the streamer has cut more than 450 jobs. In Tuesday’s financial report, Netflix said the cuts resulted in around US$70m in severance costs.

In related news, Netflix revealed that it will acquire the Sydney- and Vancouver-based animation studio Animal Logic.

The acquisition will bring more than 800 staff under the Netflix umbrella, with the streamer saying the deal will “accelerate the development of our animation production capabilities and reinforces our commitment to build a world-class animation studio.”

Netflix has previously worked with Animal Logic on projects including The Magician’s Elephant and the upcoming The Shrinking of the Treehorns. The deal is expected to close later this year and remains subject to certain regulatory approvals.

For full analysis of Netflix’s quarterly earnings report, click HERE.

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