Netflix Results Better Than Expected, Ads Start In 'Handful' Of Markets

Amidst growing evidence of maturity in the streaming TV market, Netflix posted better-than-expected second-quarter financial results -- with lower-than-expected subscriber losses and modest revenue gains.

Netflix lost 970,000 subscribers in the period globally, versus analyst expectations of a decline of two million subscribers.

The company expects that the third quarter will offer a slightly better picture -- growing by one million subscribers.

Analysts estimate Netflix will add 1.8 million subscribers.

Looking at some specific markets, the U.S. and Canada had a second-quarter decline of 1.3 million subscribers from the previous quarter, now totaling 73.3 million.

On the flip side, there was growth of 1.1 million subscribers in Asia-Pacific markets, to total 34.8 million.

Total global subscribers are now at 220.67 million -- up 5.5% versus the second quarter of 2019.



All this gave the market a bit of relief. In after-market trading, Netflix at one point was up 10% to $216.74.

This provided some relief versus results of the previous first quarter -- which upended things.

Netflix, surprisingly, sank by 200,000 subscribers, while analysts were expecting an increase of 2.7 million. This wide disparity sent alarm bells ringing in the stock market. Year-to-date, Netflix stock is down 67% to $201.63.

With regard to its highly anticipated, lower-cost advertising-supported option, Netflix says somewhat emphatically in its shareholder letter: “Our lower priced advertising-supported offering will complement our existing plans, which will remain ad-free.”

Netflix says its upcoming ad option will start in "a handful of markets where advertising spend is significant," and adds that "our advertising business in a few years will likely look quite different than what it looks like on day one." 

Netflix says it is targeting the launch of the ad-option tier in the early part of 2023. 

Microsoft is Netflix's global advertising technology partner in this effort.

The company says it intends to create a better ad experience than what is available on linear TV. “We think advertising can enable substantial incremental membership (through lower prices) and profit growth (through ad revenues).”

Netflix continues to tout its strength in total TV viewing time versus other competitors -- against other traditional longtime measures that TV networks and platforms have used, such as average minute viewing.

For the September 2021 to May 2021 TV season, Netflix totaled 1.334 trillion minutes viewed according to Nielsen measures -- 77% higher than second-place CBS' 753 billion minutes. NBC was next at 597 billion minutes, followed by ABC with 472 billion; Fox, 323 billion; Disney+, 245 billion; Amazon Prime Video, 174 billion; and Hulu, at 128 billion.

Netflix also says its share of Nielsen’s ‘The Gauge’ index will grow to an all-time high of 7.7% in June versus a 6.6% share in June 2021.

Second-quarter revenue was up 9% to $7.9 billion, with net income 7% higher at $1.44 billion.

Despite all the marketplace hiccups, Greg Kahn, chief executive officer of GK Digital Ventures, says: “All in all, the results weren’t great but were better than expected.” In addition, he says overall viewership remains strong and management performed well "in the face of an extremely tough economic and competitive environment."

1 comment about "Netflix Results Better Than Expected, Ads Start In 'Handful' Of Markets".
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  1. Ed Papazian from Media Dynamics Inc, July 20, 2022 at 7:30 a.m.

    Wayne, those "Nielsen" numbers cited by Netflix for Amazon, Hulu and Disney+are well below what Nielsen's The Gauge has been indicating relative to Netflix's viewing. For example, in your piece, it states that Netflix garnered more than ten times the viewing that Hulu registered , yet Nielsen is showing Hulu with about  half as many viewing minjutes as Netflix----based on its share of viewing stats. In like manner, your  report credits Amazon Prime with only 13% as much viewing as Netflix but  The Gauge says that it  aggregates roughly a third as much. The Disney + comparison is closer but The Gauge shows Disney+ doing better, relatively, than the Netflix release indicates. What gives?

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