by Lisa Richwine and Dawn Chmielewski
LOS ANGELES, Oct 18 (Reuters) – Netflix ended subscriber drain in the third quarter, picking up far more new customers than expected, while sounding slightly more optimistic than Wall Street for the end of the year with a new cheaper subscription but with advertising.
The action of the American specialist in video on demand was indicated in sharp increase of nearly 15% in transactions after the close Tuesday at the New York Stock Exchange. The title, which has long been favored by investors during the rapid growth of the platform, has plunged nearly 60% since the start of the year, until the publication of these quarterly results.
Netflix brought in 2.4 million new subscribers worldwide in the July-September period, more than twice the 1.07 million new subscribers analysts expected according to the Refinitiv consensus.
During this quarter, the platform broadcast the latest episodes of the hit series “Stranger Things” as well as the series about serial killer Jeffrey Dahmer, which quickly became one of its biggest hits.
Netflix had suddenly lost 1.2 million subscribers in the first half amid increased competition in online video, a maturing market in the United States and in which new entrants such as Paramount+, Paramount Global’s service , nibble shares with live broadcasts of sports competitions.
Netflix now has 223.1 million subscribers worldwide.
TURNOVER BETTER THAN EXPECTED
In its quarterly letter to shareholders, the platform writes that its competitors are losing money trying to attract subscribers.
“Our competitors make heavy investments to support subscriptions and loyalty, but building a large and successful streaming business is difficult,” says the online video specialist.
Netflix thus estimates that its competitors will end the year 2022 with a cumulative operating loss “well over 10 billion dollars” when itself should generate an annual profit of 5 to 6 billion.
Among these competitors, however, are platforms backed by giants such as Walt Disney, which compensate for losses in video on demand with other entertainment activities such as amusement parks.
In the third quarter, Netflix exceeded Wall Street expectations with sales of 7.9 billion dollars (8 billion euros), up 6% year on year. Earnings per share were $3.10.
The platform expects to gain 4.5 million subscribers by the end of 2022, a slightly higher forecast than analysts who expect 4.2 million on average. For the fourth quarter, Netflix forecasts revenue of $7.8 billion, a slight decline from the previous three months that it attributes to the strength of the dollar.
Netflix will launch a $7 per month subscription with advertising in early November, an initiative for cost-conscious customers that platform executives have long resisted.
Paolo Pescatore, an analyst at PP Foresight, said he expects some current clients to switch to this formula.
“Some will switch to the cheaper subscription or decide to go back to Netflix,” he said. “This initiative is as much about retaining users as attracting new ones.”
In particular, Netflix is due to release a new season of the hit series “The Crown” about the British royal family during the fourth quarter and will broadcast a sequel to the film “Knives Out” released in 2019.
(Report Lisa Richwine and Dawn Chmielewski, with Tiyashi Datta in Bangalore, French version Bertrand Boucey)