Get your free copy of Editor’s Digest
FT editor Roula Khalaf picks her favourite stories in this weekly newsletter.
Netflix added 8 million new subscribers in the second quarter thanks to its hit shows. Baby Reindeer and Bridgerton, The streaming service’s revenue and profit beat Wall Street expectations.
The number of new subscribers was the highest for a second quarter since 2020. Netflix The company has seen explosive growth during the pandemic, but it warned that new subscriber numbers in the current quarter will be lower than they were a year ago, when the crackdown on password sharing was in full effect.
Profit rose 48% to $4.88 per share, and revenue rose to $9.6 billion, beating Wall Street expectations. Netflix also raised its full-year revenue forecast, which it said “reflects strong subscriber growth trends and business momentum.”
Netflix said that while ad plans currently account for 45% of subscriptions in the markets where it serves, they aren’t expected to become a “major driver of revenue growth” until 2024 or 2025. Ad plan subscriptions grew 34% from the previous quarter.
Netflix’s strength contrasts with continuing growing pains for traditional studios. Streaming ServicesIn a letter to shareholders, Netflix pointed to the struggles of its rivals, saying they “are investing heavily in premium content, yet viewership across streaming and linear services is relatively low.” [TV] “It continues to decline.”
Netflix co-chief executive Greg Peters said its “top priority is to build scale” for its advertising business, and the company is doing so by hiring new salespeople and building its own ad platform to replace the current Microsoft system. “This will enable a suite of innovations, a better user experience and better advertising capabilities,” he said.
Netflix has been adding one-off sporting events to its programming, including a golf tournament, a Mike Tyson bout and two Christmas Day football games, leaving Wall Street wondering whether the company will strike deals with sports leagues.
Co-CEO Ted Sarandos poured cold water on the idea of a big sports deal: “It’s very hard to make money on big league sports when there’s an entire season,” he said. “Making shows for Netflix is a big step forward.” [sports] At events, we don’t carry large amounts of cargo. This is the economics we like and can accept.”
Contents of question artificial intelligencePeters said Netflix has been using “AI-like” techniques to increase engagement with users, adding that the new generative AI technology “can improve discovery and recommendations for customers.”
Sarandos said the impact generative AI will have on the creative community is “hard to predict.”
“A lot of filmmakers and producers are experimenting with AI right now and we’ll have to wait and see how it develops,” he said. “The focus needs to be on the quality of storytelling.”
