Netflix Inc. has raised prices for some US, UK, and French customers after achieving its best subscriber growth quarter in years. This is a sign that management believes in the future, even though rival streaming services are losing money.
, the world’s leading paid-streaming service , announced on Wednesday that it had added 8.76 millions customers in its third quarter. This was far more than analysts expected and increased its subscriber base from 247.2 to 258,6 million. The company credits a strong programing slate and its crackdown against password sharing.
Investors were concerned that Netflix would lose customers if they forced those who shared accounts to purchase their own subscriptions. The crackdown led to an increase in new subscribers without a significant increase in cancellations. Netflix has now set a goal to add over 20 million new customers in 2018, a huge jump from the 9 million subscribers it had in 2022.
Netflix shares rose up to 13% in extended trading, reaching $392 after the announcement of results. The shares were up by more than 17% through Wednesday’s close of regular trading, surpassing the S&P 500 Index’s 12% increase.
Netflix has been encouraged to increase prices in its largest markets by the success of its paid-sharing program, which allows customers to purchase additional access on behalf of friends and family. Netflix will increase the price of its most expensive US plan by $3, to $23, and the basic plan by a further $2, to $12. The other two plans remain the same. The company is also taking similar measures in France and the UK, two other major markets.
In the third quarter, Netflix’s biggest growth came from Europe, Middle East and Africa. In this region, the company has added nearly 4 million new customers. Netflix’s average revenue per customer has not changed significantly in the last year.
Netflix expects to earn $2.15 per share and have revenue of $8.69 Billion this quarter. This is slightly less than Wall Street’s projections. The company predicted that subscriber growth would be comparable to the quarter just ended, plus or minus several million.
Netflix is implementing its plan in phases, so the benefits of the crackdown on passwords will continue to be felt over the coming quarters.
In a videotaped post-results interview, Greg Peters, co-Chief executive officer of the company said: “We are incredibly happy with how things have been going.”
Netflix is trying to revitalize its growth after several years of stagnation. One major initiative is cracking down on password-sharing. The company also rolled out an advertising-supported version of its streaming services in 12 markets. The company reported that about 30% of the new customers in these markets chose to watch ads during the last quarter.
Netflix is growing again as its competitors struggle to understand their streaming business. Walt Disney Co. Warner Bros Discovery Inc., and Paramount Global all reduced costs and let go of staff in order to improve their financial performances. They spent billions to fund new streaming service that can replace declining linear TV networks. Most of the streaming services are losing money.
Netflix, on the other hand reported revenue and profits that exceeded Wall Street’s expectations for the third quarter. The earnings rose to $3.73 per share, exceeding estimates of $3.56. Revenue grew 7.8%, to $8.54 Billion, a little ahead of expectations.
The company said that profit margins will improve by at least 22 percent next year, and could grow even more in the future.
The labor strike in Hollywood boosted cash flow. The management expects $6.5 Billion in free cash flow for this year. This is up from the previous forecast of at least 5 Billion. The strike-related reduction in content spending is about $1 billion.
Netflix has been able to release many of its programs on time, despite the strike. This is because most of them were already finished. The company has released new seasons for the popular shows Virgin River, Heartstopper and created new hits like the manga adaptation One Piece.
Netflix’s most popular show in the first quarter of 2018 wasn’t a original. Suits was the most watched program in streaming this summer, thanks to Netflix. The company announced on Wednesday a deal with Skydance Media, a David Ellison-owned production house.
In a letter sent to shareholders, the company stated that “we’ve demonstrated that with discipline and focus on the longer term, you can create a strong, sustainble streaming business.”