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Netflix has lost almost 1 million subscribers — and that’s good news

Netflix has lost almost 1 million subscribers -- and that's good news
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Netflix lost fewer subscribers than feared last quarter and reported a sharp drop in overall members — but only after a warning would it suffer a more dramatic drop.

Earlier this year, Netflix reported its first membership drop in more than a decade — a plunge that should herald an even deeper drop in subscriptions now. leg Netflixstill the world’s dominant streaming video subscription service, said April-June subscribers fell by 970,000 to a total of 220.67 million, according to its second-quarter report Tuesday.

That’s still the deepest drop in membership the company has ever reported, but it’s surpassing it Netflix‘s April forecast that it would lose 2 million members worldwide. (According to a Refinitiv poll, analysts on average essentially aligned their estimate with Netflix’s forecast.)

It’s “in a way difficult to lose 1 million and call it a success,” Netflix co-CEO Reed Hastings said late Tuesday in a taped discussion of the results. “But really, we are very well positioned for next year.”

Still, Netflix’s third-quarter outlook fell short of analysts’ expectations, as Netflix forecast it would add 1 million members versus the consensus estimate of an increase of 1.8 million subscribers.

Investors nonetheless welcomed the news after Netflix’s stock price took a hit this year. In premarket trading on Wednesday, Netflix shares were up 4% to $209.72. But the stock has lost two-thirds of its value so far this year as Netflix’s suddenly shrinking membership has eroded its status as a Wall Street darling, just as it has shaken Hollywood’s faith in streaming as the engine of the future of television.

Netflix’s years of unabated subscriber growth has prompted almost every major Hollywood media company to pour billions of dollars into their own streaming businesses. This so-called stream wars led to a wave of new services, including AppleTVPlus, DisneyPlus, HBO Max, peacock and Outstanding plus — a glut of streaming options, complicating how many services you have to use (and often pay for) to watch your favorite shows and movies online.

Netflix is ​​now feeling the heat of intensifying competition to keep your attention and your subscription account, pursuing strategies it has discarded for years.

For one, the company plans to launch cheaper subscription plans supported by advertising. Although Netflix paved the way for streaming TV, its all-ads strategy has fallen behind industry standards. As new competitors entered the market, they set up memberships that give viewers like you more options. Now, most of Netflix’s competitors have a multi-tier model, typically offering cheaper memberships with ads as well as pricier subscriptions without ads.

And Netflix is ​​also testing password-sharing fees, aiming to reach the more than 100 million homes that already watch Netflix but aren’t paying directly for it.

For now, those experiments are limited to Latin America, but Netflix said it plans to introduce an account-sharing fee structure in 2023.

At the moment it tests two schemes. In the first case, Netflix charges a fee to add additional memberships as official “sub” accounts. Next, Netflix said it would try a new method starting next month that would require you to add additional “houses” where you can stream Netflix in addition to a primary residence, with a cap on how many additional houses you can add, ever after how much you already pay for Netflix.

Elsewhere in its report, Netflix said membership in the US and Canada, its largest single region (for now), fell by 1.3 million to a total of 73.28 million. Subscriptions also fell by 770,000 to 72.97 million in Europe, the Middle East and Africa.

But in the Asia-Pacific region, Netflix added 1.08 million subscribers to 34.8 million, and in Latin America the company added a slim 10,000 new members for a total of 39.62 million.

Overall, Netflix posted earnings of $1.44 billion, or $3.20 per share, in the most recent period, compared to $1.35 billion, or $2.97 per share, last year. Revenue rose 8.6% to $7.97 billion.

Analysts, on average, were expecting earnings per share of $2.75 and revenue of $8.04 billion.

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