Netflix says that after two consecutive quarters of subscriber losses it is back on a path to growth, reporting a gain of 2.41 million subscribers in the third quarter, 60% of them in the Asia Pacific region. It is forecasting to add another 4.50 million subscribers in the fourth quarter but will cease quarterly subscriber forecasts after that. It says that membership growth is only one aspect of the revenue picture.
“Well, thank God, we’re done with shrinking quarters,” Reed Hastings, the co-founder and co-chief executive of Netflix told analysts.
“We’re still not growing as fast as we’d like,” added Spencer Neumann, the chief financial officer. “We’re pleased with our progress, but we know we’ve got a lot more work to do.”
Netflix ended the third quarter of 2022 with 223.09 million subscribers, a 4.5% year on year gain. That was slightly ahead of its own conservative forecast. Having learnt the danger of disappointing investors, Netflix will no longer forecast subscriber numbers, although it will continue to report regional numbers quarterly.
The number of Netflix subscribers in the Europe, Middle East and Africa region passed that in the United States and Canada for the first time, at 73.53 million compared to 73.39 million. Yet much of the growth came from the Asia Pacific region, which gained 1.42 million subscribers to reach 36.23 million.
Netflix is adopting what it describes as a “thoughtful approach” to account sharing, allowing for the creation of extra member sub accounts for family and friends, and enabling users to transfer their Netflix profile to their own account.
Netflix accounted for 8.2% of television viewing in the United Kingdom in September, according to BARB, the industry audience measurement organisation. In the United States, Netflix accounted for 7.3% of viewing according to Nielsen, which reports that online video now accounts for nearly 37% of all television viewing. Netflix says it hopes that other measurement companies around the world will join BARB and Nielsen in reporting their share of viewing.
Netflix is launching its advertising supported subscription plan in 12 international markets that between them account for $140 billion of television advertising spend, or over three quarters of the global market outside China and Russia.
While Netflix says that it is “very optimistic” about advertising, it does not expect it to make a material contribution to its revenues in the fourth quarter.
Revenue in the third quarter was $7.93 billion, down on the previous quarter due to the impact of exchange rates against a strengthening dollar, but up the same quarter the previous year. With free cash flow of $472 million for the quarter, Netflix is operationally profitable, although it still has $14 billion in debt. It estimates that its competitors are all losing money, with combined operating losses of over $10 billion in 2022. Netflix claims that its focus as a pure-play online business is an advantage.
The market capitalisation of Netflix rose on the more positive news, but its stock was still down by over 50% on the price a year previously.