Netflix shares surge as it reverses subscriber slump | Business and Economy News

From July through September, Netflix added 2.4 million new subscribers worldwide, more than double the forecast.

Reversing subscriber losses, Netflix Inc offered a slightly more optimistic outlook than Wall Street had anticipated, with a forecast that a new ad-supported streaming option would help it add 4.5 million subscribers by the end of the year.

Netflix shares are up nearly 14 percent in after-hours trading. The company’s stock, an investor favorite during its years of rapid growth, was down almost 60 percent this year ahead of the earnings report.

From July through September, Netflix added 2.4 million new subscribers worldwide, more than double the consensus forecast of 1.07 million by analysts polled by Refinitiv.

During the quarter, Netflix released the final episodes of the sci-fi hit Stranger Things, as well as serial killer series Dahmer – Monster: The Jeffrey Dahmer Story, which became one of the most-watched Netflix series of all time.

The streaming giant is working to spur membership growth after a sudden drop in the first half of the year, when the company’s subscriber base shrank by 1.2 million amid a troubled global economy and growing competition for online video viewers. Netflix now has a total of 223.1 million subscribers around the world.

Most established services are no longer growing in the United States, where the market has matured. Newer entrants, like Paramount Global’s Paramount+, are gaining market share thanks to live sports programming.

In its quarterly letter to shareholders, Netflix noted that streaming media companies are losing money trying to attract viewers.

“Our competitors invest heavily to grow subscribers and engagement, but building a large, successful streaming business is difficult,” the letter reads.

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Netflix estimated that its competitors would end 2022 with combined operating losses of “well over $10 billion,” compared to Netflix’s annual operating income of $5 billion to $6 billion.

Competitors like Walt Disney Co run multiple businesses, including television networks and theme parks, to help offset streaming losses.

For the third quarter, Netflix beat Wall Street forecasts with revenue of $7.9 billion, up 6 percent year-on-year. Earnings were $3.10 per share.

The company’s forecast of 4.5 million customer pickups by the end of 2022 was slightly ahead of Wall Street estimates, which had averaged 4.2 million. For the fourth quarter, Netflix is ​​forecasting $7.8 billion in revenue — a sequential decline attributed to the strong US dollar.

Netflix is ​​launching a $7-a-month streaming plan with ads in early November to lure cost-conscious customers, a move executives have long resisted.

PP Foresight analyst Paolo Pescatore said he expects some of Netflix’s current subscribers to switch to the cheaper plan.

“Some will downgrade or choose to return to Netflix,” Pescatore said. “The move is both about retaining users and signing up new ones.”

Disney, Warner Bros Discovery, and other companies also offer or plan to offer ad-supported viewership options.

While Netflix is ​​making various changes to spur growth, the company said it remains committed to producing original programming and releasing all episodes at once to allow for binge-watching.

“We believe that allowing our members to be immersed in a story from start to finish increases their enjoyment, but also their likelihood to tell their friends, which then means more people watch, join and stay with Netflix ‘ the company said.

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A new season of British royal drama The Crown and a sequel to the 2019 film Knives Out will also be released in the fourth quarter.

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