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Netflix Loses A Million Subscribers, Better Than Expected

Netflix scared off many investors when it predicted it would shed two million subscribers during the June quarter, after losing 200,000 the previous quarter.

The company’s Q2 earnings report has proven better than expected, with worldwide subscribers dropping by ‘only’ one million.

Unfortunately, although they managed to slow the bleeding on a global scale, in the US and Canada, which is by far its biggest market, Netflix lost 1.28 million subs during the quarter, more than double the 600,000 drop it suffered during the March quarter.

Netflix has 73.28 million paid subscribers in the US and Canada, and 220.67 million worldwide.

Despite this drop-off, revenue increased 9 per cent year-on-year during the quarter, up from US$7.3 billion in 2021 to US$7.97 billion (A$11.54 billion) this past quarter. This is largely due to numerous cost-cutting measures, including a number of firing rounds which saw hundreds of employees let down.

Net cash generated by operating activities in Q2 was $103 million, compared to a $64 million lost in the prior year.

The Asia Pacific region is where Netflix has been making strides.

Revenue grew 23 per cent year-on-year, with the US$900 million plus revenue approaching the Latin America revenue. 1.1 million paid members were added in the region, up from the 1 million for the year prior.

APAC remains the one market where Netflix subscribers are growing, and the company will be focusing efforts there, as well as using the region as a testing ground for further global expansion.

“Asia is a great proxy for other markets in the world,” said Tony Zameczkowski, vice president of business development for Asia Pacific.

“There are similarities between emerging Asia and other emerging markets like Africa and Latin America. Learnings here can be easily replicated or leveraged by those regions.”

Scanline VFX, a subsidiary of Netflix, will invest A$141 million in a special visual effects facility in South Korea, part of Netflix’ push to create Korean originals after both Squid Game and Hellbound became global smashes.

Netflix has forecast a 12 per cent year-on-year revenue growth for quarter three, and an addition of one million subscribers during the quarter. If this bears out, it will erase the quarter two losses.

“We’re in the early stages of working to monetise the 100m+ households that are currently enjoying, but not directly paying for, Netflix,” the report reads. “We know this will be a change for our members.”

In addition, the new advertising tier will roll out, adding extra subscribers.

“Over the medium term, we intend to continue to adjust our business as appropriate given the relative strength of the USD to protect our operating margin and try to avoid immediate actions that we believe could be detrimental to the business,” Netflix said.

 



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