Netflix surpassed Wall Street’s estimates of 5.1 million new subscribers by over 1 million, sending shares soaring.
Investors expected Netflix to sign up four million new subscribers during the three-month period ending in September. The new programming included the murder mystery The Perfect Couple, Kaos which is a modern interpretation of Greek mythology and the romantic comedy Nobody Wants This.
Netflix, a Los Gatos-based DVD postal service founded in 1997, has reported quarterly revenues of $9.825 Billion, just above the consensus estimate of $9.769 Billion. After the earnings report, shares rose $30.49 or 4.3% to $717.01. The stock has increased by 47 percent since the beginning of the year.
Netflix is still the market leader, despite its slower growth in new subscribers than it has been for six quarters. It competes with other streaming services such as Disney+, Apple+, and Amazon Prime.
The company has tried to divert investor attention from the number of subscribers to other metrics such as revenue growth and profit margins. The company reported that its operating margin was 30 percent in the third quarter, up from 22 percent a year ago.
In a letter sent to shareholders, the company stated that “we’ve delivered on the plan to reaccelerate our businesses and we’re thrilled to finish the year with a strong fourth-quarter slate.”
Netflix has now 282,7 million subscribers. It is working on raising revenue through its new ad supported plans, but it has stated that advertising will not be a major growth driver before 2026. Antenna, a research firm, reported that Netflix had added more than 1,9 million new subscribers to its ad supported service in the third quarter.
Advertisers are attracted to live events such as sports. Netflix will broadcast a fight in November between YouTube star Jake Paul, and former heavyweight boxer Mike Tyson. The first NFL games will be streamed in December.
Parrot Analytics reports that Netflix overtook an established studio for the first quarter of the year in terms of the US demand for original series. Netflix had a 9.6 percent share of the TV content market produced under a corporate umbrella. It surpassed NBCUniversal in fifth place, with a share of 9 percent.
Netflix’s 2012 original TV catalogue was in greater demand than NBCUniversal’s, whose original programs date back to the 1940s. Netflix’s share was still behind Walt Disney, Warner Bros Discovery, and Paramount Studios, who had 18,4%, 16,7%, and 11,1% respectively. The demand for original content has been identified as a key factor in subscriber growth.
Mike Proulx is the research director of Forrester. He said, “On the surface Netflix seems to be trending in the right direction. A steep decline in the number of net new subscribers, however, is concerning. There is still room for growth in net subscribers internationally, but the US has reached its limit.”
Proulx said: “As streaming users fragment as consumers choose more streaming services, the amount of advertising dollars available will decrease.” Netflix’s long-term success depends on its ability to scale its advertising solutions, reach the correct audiences and deliver tangible results for brands.
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