New global subscribers for Netflix rocketed past estimates by almost three times -- posting 5.9 million additions, mostly due to its efforts around paid-sharing.
Analysts were projecting around a 2.1 million gain. In the
first quarter, Netflix added 1.8 million global subscribers. Netflix now has 238.4 million total global paid subscribers; 75.6 million in the U.S. and Canada.
Rising subscribers came from paid-sharing -- this as a result of Netflix’s crackdown on the elimination of free password sharing provided by existing Netflix subscribers.
But at the same time analysts say Netflix’s net income under-delivered -- just up 3% to $1.49 billion for the second quarter of 2023. Revenues also were a modest gain -- 2.7% to $8.2 billion. Analysts were expecting $8.3 billion.
All this pushed down Netflix stock by 5% in after market trading. It closed on Wednesday up 0.6% to $477.59.
With regard to concerns writers and actors strikes, analysts project operating income could grow largely because of lower costs coming from fewer or halted TV and movie production.
The company says it expects revenues to accelerate in the second half of 2023 “as we start to see the full benefits of paid sharing plus continued steady growth in our ad-supported plan.”
Netflix’s closely watched average revenue per membership (ARM) was basically flat at $16.00 versus that of the second quarter a year ago -- but slightly down from the $16.18 in the first quarter of 2023.
Netflix said this was due to limited price increases the last year, and as well as higher mix from membership growth from lower ARM countries.
In addition, Netflix’s introduction of a $6.99 advertising-supported “Basic With Ads” plan in the U.S -- about half the price of its “Standard” $15.49/month plan -- had some effects on its ARM metric. Still, analysts anticipate growing advertising revenues will boost ARM in future periods.
Netflix also announced plans to drop its ad-free “Basic” $9.99 plan for new and rejoining members in the U.S. and U.K. It has already been doing this in Canada during the second quarter.
Netflix says its $6.99 ad-supported “Basic With Ads” plan is of better value for customers.