The Netflix logo is displayed above the company’s offices in Los Angeles, California on January 24, 2024.
Mario Tama | Getty Images
Netflix The company reported second-quarter results on Thursday, showing the media giant’s position at the top of the streaming race thanks to increased subscriber numbers around the world and strong growth in its advertising business.
According to the company, the number of advertising-supported memberships increased 34% compared to the same period last year.
Advertising has become an increasingly important business model for media companies to make streaming profitable (and in some cases, even profitable), and Netflix shares have risen in recent quarters thanks to its crackdown on password sharing and efforts to attract subscribers to its cheaper, ad-supported tiers.
For the period ended June 30, the company’s performance compared with Wall Street expectations:
Earnings per share: $4.88 (LSEG expected $4.74)Revenue: $9.56 billion (LSEG expected $9.53 billion)Total members: 277.65 million paid members worldwide (StreetAccount expected 274.4 million)
Revenue was approximately $9.6 billion, up 17% from the same period last year, primarily due to an increase in average paid subscribers.
Netflix said it now expects full-year reported revenue growth to be 14% to 15%, up from its previous guidance of 13% to 15%.
The company said its second-quarter 2023 net income rose to $2.15 billion, or $4.88 per share, from $1.49 billion, or $3.29 per share.
Netflix’s global paid subscriber base grew 16.5% year over year to 278 million. This will be one of the last updates the company will provide on its membership numbers.
Last quarter, the company warned investors that it would stop providing quarterly membership numbers or average revenue per user after 2025, saying it would “focus on revenue and operating profit as its primary financial metrics and on engagement (i.e. time spent) as the best indicator of customer satisfaction.”
Netflix’s stock price has risen after it cracked down on password sharing and added cheaper ad-supported plans.
Netflix has begun focusing on different business strategies to drive revenue growth after subscriber growth slowed in 2022. In May, Netflix announced it would launch its own advertising platform and stop partnering with Microsoft for its technology. The company has also started adding live sports, such as NFL games over Christmas, over the next three years, a move that is likely to bring in more advertising revenue for the streamer.
“It’s live. [TV] “Because our members love it, and it generates tremendous engagement and excitement, and the great thing is, advertisers love it for the exact same reasons,” Netflix co-CEO Ted Sarandos said on an earnings call on Thursday.
Netflix has been getting into live content since before its deal with the NFL, with Sarandos noting that the company is focused on “buzzworthy, exclusive live entertainment.”
Still, original shows like “Bridgerton” and “Baby Reindeer” continue to drive engagement for the streamer.
Luke Newton and Nicola Coughlan attend a special screening of Bridgerton Season 3 Part 2 held at the Odeon Luxe Leicester Square on June 12, 2024 in London, England.
John Phillips | Getty Images
The company said Thursday that its cheaper, ad-supported plans are proving popular among its customer base, with such subscribers making up more than 45 percent of its subscriptions in markets where the option is offered.
But Netflix said Thursday that its ad-supported business is still in its infancy and that it doesn’t expect advertising revenue to be “the primary driver of revenue growth in 2024 or 2025.”
“The short-term challenge (and medium-term opportunity) is that our growth is outpacing our ability to monetize our growing advertising inventory,” the company said in the earnings call, meaning the streamer is not yet able to meet advertiser demand.
Netflix co-CEO Greg Peters said on the company’s earnings call Thursday that Netflix has historically focused on growing its ad-supported subscriber base. The company is on track to meet its 2025 subscriber goal and is now shifting its focus to monetizing its ad inventory, he said.
The company is beefing up its advertising operations to “give advertisers a more effective way to buy, which is the big feedback we’ve heard from advertisers,” Peters said Thursday.
In this regard, Netflix added that it expects to “achieve significant advertising subscriber scale for advertisers” next year, and will be able to further grow its advertising demographic beyond 2026.
