LOS ANGELES, CALIFORNIA – JUNE 12: CEO of Netflix Ted Sarandos attends Netflix’s FYSEE occasion for “Squid Recreation” at Raleigh Studios Hollywood on June 12, 2022 in Los Angeles, California. (Photograph by Charley Gallay/Getty Photographs for Netflix)
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The principle takeaway from Netflix‘s second quarter earnings is enterprise is … good.
That is proper. A big media and leisure firm’s elementary enterprise is simply high-quality.
Netflix added 5.9 million subscribers within the quarter, an indication that its two main 2023 initiatives — cracking down on password sharing and launching a less expensive $6.99 monthly promoting tier — are bringing in new subscribers. Netflix added 1.2 million subscribers in america and Canada within the quarter — its largest regional quarterly achieve since 2021.
This isn’t the story for the remainder of the media business. Disney and Warner Bros. Discovery have spent the 12 months slashing content material from its streaming companies to keep away from paying residuals and saving on licensing charges. Each corporations have laid off 1000’s of workers over the previous 12 months to spice up free money circulate. Paramount World and Comcast‘s NBCUniversal each mentioned 2023 would be the greatest annual loss ever for his or her streaming companies.
In the meantime, Netflix boosted its free money circulate estimate to $5 billion for the 12 months. Beforehand, the corporate had estimated it could have $3.5 billion, however the actors and writers strikes will reduce down on content material spend. Which means Netflix will even have much more money than it beforehand anticipated.
Subsequent quarter, Netflix forecast subscriber beneficial properties can be about 6 million once more. The corporate mentioned income will speed up within the second half of the 12 months because it sees “the total advantages” of its password-sharing crackdown and regular progress in its ad-supported plan.
Again on observe
Final 12 months, Netflix’s valuation dropped by 60% as streaming subscriber progress got here to a halt. The corporate spent ample time on earnings convention calls focusing and explaining its new online game enterprise, launched within the center of 2021, to assist begin a brand new progress narrative.
This quarter’s shareholder letter barely even addresses video video games.
Why? As a result of in contrast to the remainder of the media business, Netflix does not want a brand new narrative. The previous one nonetheless works. Streaming is rising. Money piles are rising. Promoting has buyers excited. Netflix has a gradual pipeline of worldwide content material and a deep library to climate an prolonged writers and actors strike.
“The dearth of references to video video games in its shareholder’s letter suggests promoting is the shiny object that almost all instructions the corporate’s focus,” mentioned Ross Benes, an analyst at analysis agency Insider Intelligence.
Netflix shares dropped 5% after hours. That is extra a symptom of revenue taking after Netflix’s large beneficial properties this 12 months (up greater than 62% as of Wednesday’s shut) than something to be offended about in its preliminary quarterly numbers.
After a precipitous fall final 12 months, the corporate is again on observe. And it did not even want to change trains.
Disclosure: Comcast’s NBCUniversal is the mother or father firm of CNBC.
– CNBC’s Lillian Rizzo contributed to this text.
