Netflix makes unexpected comeback after success of hit shows Stranger Things and Dahmer

Netflix made an unexpected comeback in the third quarter of this year, following the success of shows like Stranger Things and Dahmer.

Executives at the streaming giant announced on Tuesday the platform added 2.4million subscribers between July 1 and September 30 after two consecutive quarters losing subscribers. That is more than double what Wall Street expected.

Netflix also topped Wall Street projections with revenue of $7.9billion — up 6 percent from one year earlier.

Those earnings among to $3.10 per share, after the companies share prices fell nearly 60 percent over the year.

But shares have now jumped 14 percent in after-hours trading, boosted in part by the streaming service’s forecast that it would pick up another 4.5million customers in the fourth quarter.

Netflix, though, projects revenue to once again fall in the fourth quarter to $7.8 billion due as inflation continues to rise.

The gains come after Netflix released the final episodes of the fourth-season of its sci-fi hit Stranger Things, as well as its new serial-killer series Dahmer-Monster: The Jeffrey Dahmer Story, which became one of Netflix’s most-watched series of all time.

‘Netflix’s impressive numbers show the company’s growth story is far from over,’ said Investing.com analyst Haris Anwar, as Wall Street investors focus on whether streaming platforms can continue making subscriber gains amid fears of a recession.

Netflix announced on Tuesday that it gained 2.4million subscribers between July 1 and September 30. The streaming giant released the last few episodes of the fourth season of Stranger Things during that time

The announcement comes after Dahmer-Monster: The Jeffrey Dahmer Story, became one of Netflix’s most-watched series of all time

Share prices of the company fell nearly 60 percent over the year, but climbed 14 percent following the announcement on Tuesday

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The report comes as Netflix executives work to revitalize its membership growth after a sudden decline in the first half of the year, when the company’s subscriber base shrunk by a whopping 1.2 million people.

It now has a total of 223.1million subscribers around the world, with much of the gains coming from the Asia-Pacific region, where the streaming service gained 1.4million subscribers, according to The Hollywood Reporter. 

And in Latin America the streaming service gained 310,000 subscribers, while in the Europe, Middle East and Africa region, Netflix gained 570,000 subscribers.

But in the United States and Canada, Netflix only made modest gains of 100,000 subscribers as the market reaches maturity and newer entrants — like Paramount+ — are picking up more subscribers because they offer live sports programming.

In its quarterly letter to shareholders, Netflix executives, though, noted that rival media companies are losing money from streaming as they try to attract viewers.

Companies like Disney, for example, run multiple businesses including television networks and theme parks to offset streaming losses.

‘Our competitors are investing heavily to drive subscribers and engagement, but building a large, successful streaming business is hard,’ the letter said.

It estimated that competitors would end 2022 with combined operating losses of ‘well over $10 billion,’ compared with Netflix’s annual operating profit of $5 billion to $6 billion.

Netflix executives have been working to revitalize its membership growth after a sudden decline in the first half of the year, when the company’s subscriber base shrunk by a whopping 1.2 million people.

But the losses that Netflix faced this year have led to massive layoffs at the company as it pulled back on its spending growth.

It also forced the company to consider for the first time adding advertising, with Netflix now set to offer an ad-supported tier on November 3 for $7 a month.

To do so, the Hollywood Reporter reports, executives have already inked a deal with Microsoft to power its advertising technology and enlisted Snap chief business officer Jeremi Gorman and vice president of sales Peter Naylor to head the initative.

They also signed an agreement with Nielsen in the United States and the nonprofit BARB in the UK to measure viewership, to encourage advertisements. 

PP Foresight analyst Paolo Pescatore said he expected some of Netflix’s current subscribers to switch to the lower-priced plan.

‘Some will downgrade or decide to come back to Netflix,’ Pescatore said. ‘The move is as much about retaining users as well as signing up new ones.’

Another analyst, Wedbush’s Michael Pachter, saw the ad-supported tier as a tool for Netflix to reduce churn by giving price-sensitive subscribers an alternative to canceling the service.

Disney, Warner Bros Discovery and other companies also offer, or plan to offer, ad-supported options.

It announced a new feature on Monday, called Profile Transfer, which lets Netflix users easily migrate their profile to a new account, keeping hold of favorites, recommendations, viewing history and other saved data

At the same time, Netflix is cracking down on account sharing, announcing on Monday they will allow users to transfer their profiles to new accounts.

That means favorites, recommendations and viewing history are salvaged when profile owners start a Netflix account of their own.

Netflix said the ‘much requested’ feature is now rolling out to all users around the world, and that an email will be sent as soon as it’s available for each account.

And in its letter to shareholders on Tuesday, company executives described the Profile Transfer as a ‘thoughtful approach to monetize account sharing’ that allows for both the profile transfers and for primary account holders to add  ‘sub accounts’ if they want to pay for family and friends. 

Still, while Netflix is making various changes to propel growth, the company said it remained committed to producing original programming and releasing all episodes at once to allow binge watching.

‘We believe the ability for our members to immerse themselves in a story from start to finish increases their enjoyment but also their likelihood to tell their friends, which then means more people watch, join and stay with Netflix,’ the company said.

It now has 35 games available to play, including titles based on The Queen’s Gambit, Nailed It! and Money Heist, and has 55 more games in development.

A new season of British royalty drama The Crown and a sequel to 2019 movie Knives Out will also be released during the fourth quarter.

Netflix said it would stop providing guidance for new customers, a key gauge for Wall Street, starting in January. The company will continue to issue forecasts for revenue, operating income and other metrics.

‘We are increasingly focused on revenue as our primary top line metric,’ the company said.