Netflix Loses Nearly 1 Million Subscribers, Sets Ad Tier for Early 2023

Netflix just lost almost a million subscribers—but the number was only half of what it had expected. The world’s largest streaming service reported 220.67 million global subscribers in the second quarter. While that’s a loss of nearly 1 million—specifically 970,000, the streamer's biggest subscriber drop ever—it’s far better than the 2 million dip the company projected in April. In the first quarter of 2022, Netflix lost subscribers globally for the first time since October 2011, and missed its projected target of 2.5 million net adds. Netflix continues to bleed customers in the U.S. and Canada. The company hiked prices in January in the U.S. and Canada for the first time since 2020 in a move designed to drive revenue, but it also resulted in increased churn. Netflix Selects Microsoft as Partner for Upcoming Ad-Supported Tier The streamer lost nearly 1.3 million subscribers in the region this quarter, up from 600,000 last quarter. Growth in Asia-Pacific partially offset U.S. subscriber loss, with the APAC region adding 1.08 million subscribers. Things might be looking up for Netflix, which is projecting 1 million subscriber additions in the third quarter. Ads are on their way After months of speculation, Netflix’s ad-supported tier has a tentative launch date, targeting early 2023. Previous reports indicated the company had hoped to debut its ad-supporting offering as early as the end of this year. Last week, the streamer announced it has tapped Microsoft as its partner for the ad-supported tier. “We’ll likely start in a handful of markets where advertising spend is significant. Like most of our new initiatives, our intention is to roll it out, listen and learn, and iterate quickly to improve the offering,” the company said in a letter to shareholders. “So, our advertising business in a few years will likely look quite different than what it looks like on day one.” Over time, the company continued in its letter, "our hope is to create a better-than-linear-TV advertisement model that’s more seamless and relevant for consumers, and more effective for our advertising partners. While it will take some time to grow our member base for the ad tier and the associated ad revenues, over the long run, we think advertising can enable substantial incremental membership (through lower prices) and profit growth (through ad revenues)." Last quarter, Netflix estimated that more than 100 million households had access to the streaming service via password sharing. While it previously indicated it would crack down on password sharing, “paid sharing” is now set to roll out in 2023. “Our goal is to find an easy-to-use paid sharing offering that we believe works for our members and our business that we can roll out in 2023. We’re encouraged by our early learnings and ability to convert consumers to paid sharing in Latin America,” the company said. Content is king Increased competition from other streaming services remains a thorn in Netflix’s side, though the company is confident it can combat slowing revenue growth through its content slate. “Our content offering is designed to satisfy a broad range of member tastes by providing an unmatched variety and quality of titles,” the company said, pointing to titles like the fourth season of Stranger Things (which had 1.3 billion hours viewed in the first four weeks). This quarter marks the third time the company measured its releases in its “minutes viewed” metric. Stranger Things 4 led the way, but other series including Season 3 of The Umbrella Academy with 248 million hours viewed also pulled in strong numbers, as did Season 1 of The Lincoln Lawyer (277 million hours). The company also cited Nielsen data, saying its share of U.S. TV viewing reached an all-time high of 7.7% in June (vs. 6.6% in June 2021), more than any other outlet and nearly matching the combined total of CBS and NBC, the two most-watched broadcast networks. Jon Hamm Plays a Mad Santa as Fox Sports Kicks Off 2022 World Cup Campaign