Netflix had expected its subscriber base to shrink by 2 million.
Netflix lost fewer subscribers than feared in its latest quarter, reporting a significant decrease in members overall — but only after warning it would suffer a more dramatic drop.
Earlier this year, Netflix reported its first decline in membership in more than a decade — a dip that was supposed to presage an even deeper plunge in subscriptions now. But Netflix, still the world’s dominant streaming-video subscription service, said subscribers fell by 970,000 to 220.7 million total in April through June, according to its second-quarter financial report Tuesday.
That beats Netflix’s April guidance to lose 2 million members worldwide. (Analysts’ on average matched their estimate to Netflix’s guidance, according to survey by Refinitiv.)
But Netflix’s suddenly shrinking membership has undermined its status as a Wall Street darling, just as it has buffeted Hollywood’s confidence in streaming as its engine into television’s future. But Tuesday, Netflix shares were up 8.4 percent at $218.62 in recent after-hours trading.
Still, Netflix’s outlook for the third quarter fell short of analysts’ expectations, with Netflix predicting it would gain 1 million members versus the consensus estimate for a 1.8 million subscriber increase.
Years of Netflix’s unflagging subscriber growth pushed nearly all of Hollywood’s major media companies to pour billions of dollars into their own streaming operations. These so-called streaming wars brought about a wave of new services, including Apple TV Plus, Disney Plus, HBO Max, Peacock and Paramount Plus, among others — a flood of streaming options that has complicated how many services you must use (and, often, pay for) to watch your favorite shows and movies online.
Now, feeling the heat of intensifying competition to hold onto your attention and your subscription account, Netflix is pursuing strategies it previously dismissed for years.
The company plans to launch cheaper subscriptions that are supported by adverting, for one. Even though Netflix blazed the trail for streaming TV, its ad-free-only strategy has fallen behind the standards of the industry. As new competitors launched, they set up memberships that give viewers like you more options. Now most of Netflix rivals have a multi-tier model, typically offering cheaper memberships with ads, as well as more expensive subscriptions that are ad-free.
And Netflix is also testing password-sharing fees, for now only in Latin America. At first, Netflix tried a scheme that charged a fee to add additional memberships as official “sub” accounts. Next, Netflix said it would try a new method starting next month, which will establish an account’s primary residence as its “home” for that account; if you’re streaming at any additional households for more than two weeks, then you’ll need to set up — and pay for — additional “homes,” with a limit on how many additional homes you can add depending on how much you’re already paying for Netflix.