But how long can investors tolerate bad news, such as a million-subscriber loss, as being good news in the industry’s streaming arms race?
Reed Hastings, the streamer’s co-chief executive, almost seemed embarrassed on the company’s quarterly analyst call that there was “excitement”The “less bad results.” And stock traders turned nervously exuberant by lining up buy orders on Netflix that indicated an 8% pop ahead of Wednesday’s market open.
But…
“It really means little to nothing and Wall Street needs to better understand if this is sustainable,”A rival studio executive told us that. “This isn’t enough to just get things back on track.”
Netflix has a strong pull on the entertainment media market. Investors used Netflix’s quarterly earnings to purchase shares of other studios with streaming ambitions. They sent The Walt Disney Company and Warner Bros. Pre-market trading saw Paramount Global and Discovery rise sharply.
Talking heads from financial news stations cited the unexpectedly large loss of Netflix subscribers as one reason why Asian markets traded higher overnight. The Asia Pacific region is Netflix’s biggest growth market with subscriber additions in five consecutive quarters, including 1.08 million adds in the second quarter.
However, there is still some question about the time Wall Street and Hollywood will celebrate their loss. Only970,000 customers in Q2 and forecasting an additional of OnlyIn the current period, there were a million global subscriptions. The projected return to growth, as well as the looming addition of a revenue-generating ad-supported tier in 2023 and plans to crack down on password sharers, has stopped short this year’s 70% slide in Netflix stock price.
Analysts will be spending the next few weeks looking through earnings data for Hollywood. They will start with Warner Bros. Discovery — its first earnings as a merged company — in August, to determine if Netflix is a blip on the radar and other companies’ results can continue fostering long-term confidence in the streaming market. Or if Netflix (whose 220million worldwide subscribers is double that of Disney+) is showing that streaming has gone limp.
“If the market-leader is adding subs right now and plans to add the rest of the year, it’s great news for competitors,” said Sarah Henschel, an analyst at market research firm Omdia, referring to Netflix’s projected 1 million subscriber growth in the current quarter. “It’s an all ships rising opportunity.”
To be sure, Netflix posted 30% more cash flow from operations year-over-year — and did so despite the strong U.S. dollar devaluing revenue gained from overseas subscribers. Netflix’s letter to shareholders said the company would focus on its streaming content intently, and push aside other revenue streams to continue focusing on the user experience.
“This freedom means we can offer big movies direct to Netflix, without the need for extended or exclusive theatrical windows, and let members binge-watch TV if they want, without having to wait for a new episode to drop each week,”The company stated this in its quarterly shareholders letter.
The company still has to deal with major Hollywood studios looking to steal their subscribers. This is compounded by the fact that inflation is causing some customers to make a hard choice — keep Netflix (which at nearly $16 is the industry’s most expensive streamer) or switch to a cheaper alternative that might have advertising.
Netflix also said it’s not considering raising this year’s content spend beyond $17 billion (which is what the company spent in 2021), and Chief Financial Officer Spencer Neumann said the amount would remain in “the same zip code”For the next few years.
Eric Steinberg is an analyst with Whip Media and entertainment data analytics firm Whip Media. He believes that the problem may lie in how they use their content budget. He stated that Netflix relies too heavily on well-known hits such as “The Rock.” “Stranger Things,”This is the last season of which there will be “refreshing their slate with new ones.”
“Outside of ‘Inventing Anna,’ a miniseries, Netflix has not had a new hit this year that has really permeated the culture,”He said.
That’s not good news, at least according to data compiled by independent analysts.
Recurly, a platform for consumers that monitors and manages subscription payments, recently conducted a poll showing 31% of respondents intending to cancel certain subscription services in the coming year. 46% of U.S. customers have already canceled services because of price increases in the past year.
Recurly’s research also stated that “for millennial and Gen Z consumers, 44% said access to exclusive and compelling content or services is a major driver for subscriptions.”This means that they returned to Netflix to watch shows such as “Stranger Things,” but still leaves the question of what’s next in retaining them and luring new subscribers.
“Consumers are going to get more selective, more picky and more intentional with streaming budget picks each month and we will see across the industry increased bundling and aggregations that brings simplicity and discount price,”Paul Erickson is a Park Associates streaming market analyst.
“It doesn’t necessarily mean their oxygen is exhausted in terms of the [subscription video on demand] market,”He said. “There’s a limit on subscription growth for everyone. We have yet to see where the wall is.”
