Netflix Inc on Tuesday reported that it gained more than 2 million subscribers last quarter, calming investor fears that the streaming giant was losing paying customers.
The company said it ended the third quarter with slightly more than 223 million subscribers worldwide, up about 2.4 million, after subscriber ranks ebbed during the first half of the year.
Netflix shares shot up more than 14 percent in after-hours trading to US$275 on the earnings news.
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“Well, thank God we’re done with shrinking quarters,” Netflix co-chief executive officer Reed Hastings said during an earnings call. “We’re back to the positivity; we’ve got to pick up the momentum.”
The turnaround in subscriber growth came as Netflix is poised to debut a subscription option subsidized by ads next month across a dozen countries.
The new “Basic with Ads” subscriptions would be priced at US$6.99 in the US, US$3 less than a no-ads basic option, Netflix chief operating officer Greg Peters said in a briefing.
“The timing is great because we really are at this pivotal moment in the entertainment industry and evolution of that industry,” Peters said. “Now streaming has surpassed both broadcast and cable for total TV time in the United States.”
Netflix is working with Microsoft Corp on its ad-supported tier and teams at both companies would likely need to be bulked up to handle the huge demand by advertisers, Peters said.
“We’re turning some folks away right now because we just don’t have the marketing capacity to serve everyone,” he said.
After having shunned advertising since it started its streaming service, Netflix acquiesced as competition in the market intensifies and as consumers recoil from soaring inflation.
Rival streaming platform Disney+ is to launch ad-subsidized subscriptions in December.
Netflix expects to add another 4.5 million subscribers in the final quarter of this year.
The company said in a letter to shareholders that it believes its competitors have been losing money as they invest heavily to win audiences.
Netflix reported a quarterly profit of US$1.4 billion on revenue of US$7.9 billion — a net income slightly less than in the same period last year, when it brought in more money.
Netflix plans to hold steady with spending about US$17 billion a year on content, co-chief executive officer Ted Sarandos said.
“I feel better and better about that [US]$17 billion of content spend, because what we have to do is be better at getting more impact per billion dollars spent than anybody else,” Serranos said. “Big shows that folks engaged with and talk about drive a lot of growth.”
Netflix is working to smooth out its show release rhythm, which was disrupted by the COVID-19 pandemic, executives said.
“COVID got a lot of content jammed up,” Sarandos said. “It will take several years to completely unwind the COVID logjam.”
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