Ad strategy pays off for Netflix
The world’s leading streaming video service said it ended the April-to-June period with a total of 277.7 million subscribers, as net profit dipped to $2.1 billion, but revenue surged to $9.6 billion.
The latest numbers rewarded Netflix’s moves to boost revenue after a rough patch in 2022.
In a bid to boost sputtering growth, the company launched an ad-subsidized offering last year around the same time as a crackdown on sharing passwords.
As part of that effort, Netflix also got rid of its cheapest commercial-free plan in the UK and Canada, with expectations of further expansions.
In the United States, the company is also beginning to offer some users combined packages with its one-time rivals, making itself available through joint subscriptions with Peacock and Apple TV.
Netflix in May said its ad-supported tier reached 40 million monthly active users across the globe and accounted for 40 percent of all sign-ups in the countries where it was available, up from 23 million in January.
The company also launched an in-house advertising platform so that brands can better optimize its customer data, no longer partnering with Microsoft for that technology.
Investors have cheered on the moves, with Netflix shares gaining 38 percent since the beginning of the year—though it has warned that growth in overall subscribers could slow throughout the course of the year.
A renewed warning on Thursday that the results could be lower than expected in the current quarter sent Netflix shares lower in after-hours trading.
Still, Netflix is seen as reigning supreme over the video content market, with Disney+ still struggling nearly five years after a launch that featured a slew of new content from its blockbuster Marvel and Star Wars universes.
Netflix earned an industry-leading 107 nominations for the Emmys earlier this week, with 11 nods for its surprise hit, the black comedy “Baby Reindeer.”
In terms of viewership, Netflix also scored big with “Under Paris,” a shark horror movie from France that the company said had reached 91 million views.
The third season of “Bridgerton” scored 98.5 million views in the quarter, while upcoming shows include the eagerly awaited second season of “Squid Game,” which will come with a video game.
The dystopian Korean horror tale about a fictional, deadly game show remains by far the most-watched Netflix TV series ever.
‘Signs of waning’
Analysts warned however that competitors, at some point, could figure out how to challenge Netflix.
“The competition is starting to catch up to Netflix as the company’s market dominance shows signs of waning,” said Mike Proulx, vice president at market research firm Forrester.
He noted a survey that showed the amount of monthly US users streaming from the platform had dipped, with the rivals seeing growth.
“This makes it all the more critical for Netflix to continue to double down on its ads business as a means to diversify and grow revenue,” Proulx added.
Netflix is also branching out into live entertainment and in the United States, with plans to broadcast two National Football League games for the first time.
The company said that it is not only up against its direct competitors, such as Disney, Apple or Amazon, but also the wider range of entertainment platforms, from YouTube and video games to TikTok and TV channels.
In June, YouTube was the leading streaming TV service in the United States by audience, with almost 10 percent of the video market share, and Netflix in second place with 8.4 percent, according to the Nielsen Institute.
Because the main battle is for viewer attention, Netflix plans to stop reporting subscriber numbers next year, which some investors have interpreted as a sign of problems about future growth.
