LOS ANGELES, CALIFORNIA – JUNE 12: CEO of Netflix Ted Sarandos attends Netflix’s FYSEE occasion for “Squid Game” at Raleigh Studios Hollywood on June 12, 2022 in Los Angeles, California. (Photo by Charley Gallay/Getty Images for Netflix)
Charley Gallay | Getty Images Entertainment | Getty Images
The principal takeaway from Netflix‘s second quarter earnings is business is … good.
That’s proper. A big media and leisure firm’s elementary business is simply high quality.
Netflix added 5.9 million subscribers within the quarter, an indication that its two major 2023 initiatives — cracking down on password sharing and launching a less expensive $6.99 monthly promoting tier — are bringing in new subscribers. Netflix added 1.2 million subscribers within the United States and Canada within the quarter — its largest regional quarterly achieve since 2021.
This will not be the story for the remainder of the media business. Disney and Warner Bros. Discovery have spent the yr slashing content material from its streaming providers to keep away from paying residuals and saving on licensing charges. Both firms have laid off 1000’s of workers over the previous 12 months to spice up free money circulate. Paramount Global and Comcast‘s NBCUniversal each mentioned 2023 would be the largest annual loss ever for his or her streaming companies.
Meanwhile, Netflix boosted its free money circulate estimate to $5 billion for the yr. Previously, the corporate had estimated it could have $3.5 billion, however the actors and writers strikes will reduce down on content material spend. That means Netflix will even have much more money than it beforehand anticipated.
Next quarter, Netflix forecast subscriber positive aspects might be about 6 million once more. The firm mentioned income will speed up within the second half of the yr because it sees “the full benefits” of its password-sharing crackdown and regular development in its ad-supported plan.
Back on observe
Last yr, Netflix’s valuation dropped by 60% as streaming subscriber development got here to a halt. The firm spent ample time on earnings convention calls focusing and explaining its new online game business, launched in the course of 2021, to assist begin a brand new development narrative.
This quarter’s shareholder letter barely even addresses video video games.
Why? Because in contrast to the remainder of the media business, Netflix does not want a brand new narrative. The outdated one nonetheless works. Streaming is rising. Cash piles are rising. Advertising has traders excited. Netflix has a gradual pipeline of worldwide content material and a deep library to climate an prolonged writers and actors strike.
“The lack of references to video games in its shareholder’s letter suggests advertising is the shiny object that most commands the company’s focus,” mentioned Ross Benes, an analyst at analysis agency Insider Intelligence.
Netflix shares dropped 5% after hours. That’s extra a symptom of revenue taking after Netflix’s huge positive aspects this yr (up greater than 62% as of Wednesday’s shut) than something to be indignant about in its preliminary quarterly numbers.
After a precipitous fall final yr, the corporate is again on observe. And it did not even want to modify trains.
Disclosure: Comcast’s NBCUniversal is the father or mother firm of CNBC.
– CNBC’s Lillian Rizzo contributed to this text.
Source: www.cnbc.com