Netflix beats expectations with 5m new subscribers

Netflix picked up 5.1 million subscribers in the third quarter, beating Wall Street estimates by more than 1 million users, sending the shares sharply higher.
Investors had expected Netflix to sign up 4 million subscribers in the three month period to the end of September. New programming during the quarter included the murder-mystery The Perfect Couple , Kaos, a modern take on Greek mythology, and the romantic comedy Nobody Wants This.
Netflix, which is based in Los Gatos, California, and was founded in 1997 as a DVD postal service, reported quarterly revenue of $9.825 billion, just ahead of the $9.769 billion consensus forecast.
The shares were $30.49, or 4.3 per cent, higher at $717.01 after the earnings report. Since the start of the year the stock has risen by 47 per cent.
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While new subscriber growth was at its slowest for six quarters, Netflix remains the leader in a competitive streaming market vying for share with deep-pocketed rivals such as Amazon Prime, Apple+ and Disney+.
The company, which clamped down on password sharing last year, has been trying to shift investor attention away from subscriber sign-ups to other ­metrics, including revenue growth and profit margins. The company said its operating margin hit 30 per cent in the quarter, compared with 22 per cent a year earlier.
“We’ve delivered on our plan to re-accelerate our business, and we’re ­excited to finish the year strong with a great fourth-quarter slate,” the company said in a letter to shareholders.
Netflix, which now has 282.7 million subscribers, is working to raise revenue from its new ad-supported plans but has said it does not expect advertising to become a primary growth driver until 2026. In the third quarter, the research company Antenna reported that Netflix added more than 1.9 million subscribers to its ad-supported service.
Part of the plan centres around live events including sports, a big draw for advertisers. In November, Netflix will stream a fight between the YouTube star Jake Paul and the former heavyweight boxer Mike Tyson, followed by its first NFL games in December.
Netflix overtook a legacy studio in the global demand share for original series for the first time in the third quarter, according to Parrot Analytics. The streaming giant had 9.6 per cent share of the market for TV content produced under a company’s corporate umbrella, leapfrogging over NBCUniversal, which came in fifth place with a 9 per cent share.
This shows there was more demand for Netflix’s original TV catalogue, launched in 2012, than that of NBCUniversal, whose original programming dates back to the 1940s. Netflix’s share remained behind the legacy studios Walt Disney, Warner Bros Discovery and Paramount, which had 18.4 per cent, 16.7 per cent and 11.1 per cent respectively. Demand for original content is seen as a key indicator for subscriber growth.
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Mike Proulx, research director at Forrester, a consultancy, said: “On the surface, Netflix is trending in all the right directions. However, a steep decline in net new subscribers is what’s concerning. While there’s room for net subscriber growth internationally, in the US things are getting tapped out.”Proulx added: “As consumers have more and more choice in streaming services, there will be increased fragmentation in the overall streaming user base and only so many ad dollars to go around. For its long-term growth, Netflix must demonstrate that its ad solutions can scale, reach the right audiences, and ultimately deliver tangible results to brands more so than its competition.”