The aggressive strategy is paying off for Netflix: subscription growth is surprisingly on the upside

The aggressive strategy is paying off for Netflix: subscription growth is surprisingly on the upside

It is being updated.

In recent months, Netflix has come out and announced that the company will do its best to restrict users from sharing their subscriptions with other non-paying users.

This was a profit leak, and in recent quarters turnover hasn’t been anywhere near growing at the same pace it usually did in the years leading up to the pandemic.

Many media highlight this fact as the explanation behind the growth in subscriptions in the second quarter, which exceeded expectations:

The electric giant reported a net increase in paying subscribers of 5.9 million, while analysts previously expected growth of 2.1 million. Also in the first quarter, underwriting numbers exceeded previous estimates by a large margin.

It will be shown in all countries – Norway is no exception

The restriction on what Netflix refers to as “password sniffers” was initially aimed at US customers, but Netflix announced Wednesday that it will roll out to the rest of its subscribers as well.

The company calls this initiative “paid account sharing,” and reports that as of today it has been rolled out in more than 100 countries, which accounts for about 80 percent of the turnover.

Accordingly, the company is envisioning a vitamin injection into sales numbers in the second half of the year when it will “finally reap all the benefits from paid account share and steady growth in ad-based subscriptions.”

“Now that we’ve offered this at scale, we’re more confident about our financial prospects,” the company writes in the quarterly report.

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Ad capture

Advertising is another measure the company has taken to accelerate subscription and revenue growth. This is initially about offering affordable subscriptions that are funded in part by advertising.

Earlier in July, in fact at the Cannes Film Festival, Netflix announced that it is stepping up its investment in advertising, and the company will design various advertising solutions as an attempt to entice marketing directors of companies around the world.

Ad subscriptions have doubled since the first quarter, but it’s still so small that it doesn’t play a big role in Netflix’s overall revenue. However, the company hopes to be able to bring in several billion dollars in advertising in the long term.

However, sales ultimately fell just short of expectations — Netflix posted $8.2 billion, the 8.3 expected by analysts. That means sales growth of 2.7 percent over last year, and the growth rate is much lower than it was in the same quarter last year.

Overall, revenue growth over the past year and a half has been far from the levels Netflix had before and during the pandemic, when the company saw revenue growth of 20 and 30 percent quarter-over-quarter.

Falling into the aftermarket

The company also reported pre-tax profit of $1.6 billion, with analyst teams’ estimates adding $1.5 billion.

The stock rose just over 0.1 percent in trading Wednesday. Netflix investors can get to the table with prices up 63 percent so far in 2023. There’s still a long way to go to the fall 2021 high.

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Dalila Awolowo

Dalila Awolowo

"Explorer. Unapologetic entrepreneur. Alcohol fanatic. Certified writer. Wannabe tv evangelist. Twitter fanatic. Student. Web scholar. Travel buff."

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