Netflix says Stranger Things 4 gave it a boost. But it still lost a million subscribers

Netflix lost one million paid subscribers in the three months to July but this was not as bad as it expected thanks to its hugely popular series Stranger Things 4.

Netflix had been expecting to lose two million subscribers this quarter. 

Addressing the question what drove the better-than-expected results, the streaming company’s CEO Reed Hastings said: “If there was a single thing, we might say Stranger Things“. 

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In the first three months of 2022, Netflix recorded its first ever quarterly decline in paid subscribers since 2011. It lost 200,000 paid subscribers and predicted it would lose two million in the next quarter. 

This quarter, Netflix lost 1.3 million paid subscribers in Canada and the US, its largest market, where it now has 73.28 million paid members. It lost 800,000 paid members in Europe, where it now has 72.97 million paying members. 

While paid members in Europe are now almost equal to US numbers, the average revenue per membership in North America is $15.95 versus Europe’s $11.17. 

However, Netflix gained 1.1 million paid subscribers in Asia Pacific where it now has 34.8 million; and it gained 800,000 new paid subscribers in Latin America, leaving it with 39.62 million.         

Despite losing fewer subscribers than expected and remaining the largest video streaming service, it comes as rivals add new subscribers. Disney reported in May that it had added 7.9 million new Disney+ subscribers in the three months to April, giving it 87.6 million subscribers globally. Paramount in May also reported it added 6.8 million users to its Paramount+ service for the quarter, giving it 40 million subscribers.     

Netflix reported its numbers a week after announcing its ad-supported subscription in partnership with ad-network partner Microsoft. 

The ad-supported subscription tier will launch in early 2023 and is meant to address members that have recently or are about to ditch a subscription, as well as those sharing someone else’s password.  

Netflix said it is still working out how to monetize the 100 million-plus households that aren’t paying for Netflix because of password sharing. 

The company this week announced a new model to combat password/account sharing, which is being tested in Latin America. It’s already testing “add extra member” in Chile, Costa Rica, and Peru and next month will offer a new “add a home” option. This way, each Netflix account supports only one home, but an extra home can be added for $2.99 per month per extra home. The Basic plan allows for one extra home, the Standard allows for two extra, and Premium allows for three extra.

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This system will be trialled in Argentina, the Dominican Republic, El Salvador, Guatemala, and Honduras. 

Netflix said it won’t introduce similar changes in other countries, but might in 2023. 

“Our goal is to find an easy-to-use paid sharing offering that we believe works for our members and our business that we can roll out in 2023,” it said in its letter to investors. 

Netflix cited account sharing as one of the reasons behind its slowing revenue growth. The company’s Q2 2022 revenue of $7.97 billion was 8.6% higher than the same quarter a year ago, but back then it posted quarterly revenue growth of 19.4%. 

Netflix is forecasting revenue growth of 4.7% year on year in Q3 2022 and expects to gain one million new paid members in the quarter.    

Netflix users can expect more animated content from the service in future after today announcing it would buy Australian animation studio Animal Logic.