LOS ANGELES, CA – JUNE 12: Netflix CEO Ted Sarandos attends Netflix’s ‘The Squid Game’ FYSEE event at Hollywood’s Raleigh Studios on June 12, 2022 in Los Angeles, CA. (Photo by Charlie Calais/Netflix/Getty Images)
Charlie Calais | Getty Images Entertainment | Getty Images
The main harvest comes from NetflixEarnings for the second quarter were business…good.
that’s right. The underlying business of a major media and entertainment company is doing just fine.
Netflix added 5.9 million subscribers in the quarter, suggesting that its two major moves for 2023 — cracking down on password sharing and launching a cheaper $6.99-a-month ad package — are attracting new subscribers. Netflix added 1.2 million subscribers in the U.S. and Canada during the quarter, the largest regional quarterly increase since 2021.
This is not the case for other media industries. disney and Warner Bros. Discovery During the year, they cut content on streaming services to avoid paying remaining fees and save on licensing fees. Both companies have laid off thousands of workers over the past 12 months to boost free cash flow. Paramount Global and ComcastNBCUniversal has said 2023 will be the biggest annual loss ever for its streaming business.
Meanwhile, Netflix raised its free cash flow forecast to $5 billion this year. Previously, the company was projected to have $3.5 billion in revenue, but a strike by actors and writers will slash content spending. That means Netflix actually has more cash than previously expected.
Netflix predicts subscriber growth next quarter will again be around 6 million. Revenue growth will accelerate in the second half of the year, the company said, as it sees the “full benefit” of the crackdown on password sharing and steady growth in ad-supported programs.
back on track
Netflix’s valuation fell 60% last year as streaming subscriber growth stalled. The company spent a lot of time on its earnings call focusing on and explaining its new video game business. Mid-2021, to help start a new growth narrative.
This quarter’s shareholder letter barely even touched on video games.
Why? Because unlike other media industries, Netflix doesn’t need new narratives. The old ones still work. Streaming is growing. Cash reserves are growing. The ad got investors excited. Netflix has a steady stream of international content and a rich library of content to weather a prolonged writers’ and actors’ strike.
“The lack of video games being mentioned in the shareholder letter suggests that advertising is the company’s biggest focus,” said Ross Benes, an analyst at research firm Insider Intelligence.
Netflix shares fell 5% after hours. That’s more a sign of profit-taking after Netflix’s massive run-up this year (up more than 62% as of Wednesday’s close) rather than any cause for outrage in its initial quarterly numbers.
After a sharp decline last year, the company is back on track. And you don’t even need to change trains.
Disclosure: NBCUniversal, owned by Comcast, is the parent company of CNBC.
– CNBC’s Lillian Rizzo contributed to this article.