The company’s revenue for the quarter was $8.16bn, roughly where analysts thought it would be, marking a 2.7% year-on-year growth.
Operating income climbed 16% against Q2 2022 to $1.8bn. Operating margin was 22.3% and earnings per share were $3.29. Operating margin was at 22.3% and earnings per share was $3.29.
Paid sharing clampdown
“We are revenue and paid membership positive vs. prior to the launch of paid sharing across every region in our latest launch,” Netflix said in its letter to shareholders.
The streamer launched paid sharing in May in more than 100 countries, which it said account for more than 80% of the company’s revenue, and said revenue was up in each region with sign-ups exceeding cancellations.
“The cancel reaction was low and while we’re still in the early stages of monetization, we’re seeing healthy conversion of borrower households into full paying Netflix memberships as well as the uptake of our extra member feature,” the company added.
Netflix rolls out paid sharing in “almost all of the remaining countries” today (July 19). In these markets the streamer is not offering an extra member option because it recently cut prices in a number of countries like Indonesia, Croatia, Kenya, and India and said penetration is still relatively low in many of these regions.
Households borrowing Netflix will be able to transfer existing profiles to new and existing accounts.
“Now that we’ve launched paid sharing broadly, we have increased confidence in our financial outlook,” the company told shareholders. “We expect revenue growth will accelerate in the second half of 2023 as monetization grows from our most recent paid sharing launch and we expand our initiative across nearly all remaining countries plus the continued steady growth in our ad-supported plan.”
Netflix phased out its Basic ads-free tier for new and rejoining members in Canada (existing members on that plan are unaffected) and has just done the same in the US and UK.
The company forecasts $8.5bn in revenue for Q3 and expects that growth to come from increasing average paid memberships. It said it “generally
had price increases in our largest revenue markets since the first half of last year” and added that revenue from advertising and the extra member feature “are not yet material enough to offset these factors”.
Q3 operating income is forecast to be $1.9bn, and the company said it was still targeting a full year 2023 operating margin in the 18%-20% range.[hasn’t]Revenue in Q4 is anticipated to accelerate “more substantially” as paid sharing and advertising revenue increase.
Netflix also trumpeted its range of content, which it views as a key subscriber retainer. Satirical dramedy
starring Ali Wong and Steven Yeun and dating show Love Is Blind S.4 were in the Netflix top 10 throughout April, while May highlights included thriller series The Night Agent and Queen Charlotte: A Bridgerton Story.Popular series outside the US include Physical 100
and The Glory in South Korea; Marked Heart in Colombia, Alice In Borderland in Japan; The Snow Girl in Spain and Que Viva Mexico! in Mexico; as well as films like Hunger in Thailand and AKA in France.The Q2 film highlights were Jennifer Aniston and Adam Sandler in Murder Mystery 2
on 114.3m views in the first three months (views are based on views in the first 91 days of release); Jennifer Lopez thriller The Mother, which ranks ninth in Netflix’s top 10 all-time list on 131.6m views; and Chris Hemsworth back in action sequel Extraction2, which attained 116.7m views in 31 days. Regional performanceBy region North America generated $3.59bn in revenue and has been roughly the same over the last five quarters. Membership increased by 1.17m net paid additions in Q1 to 75.57m, and the average revenue per member was $16. This number is similar to the previous year. Paid net additions increased by 2.43m, to 79.81m. The average revenue per member fell 2.7% from the previous period. The number of subscribers increased to 42.47 after 1.22m net paid additions. Asia Pacific generated $919m in the second quarter, up a fraction from the previous period. Meanwhile, 1.07m net additions increased the number to 40.55. Average revenue per membership of $7.66m marked a 13.3% drop year-on-year.
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