Netflix shares surge on big subscriber growth

Netflix reported a remarkable surge in subscriber numbers during the third quarter, with nearly nine million households signing up worldwide. This impressive growth represents the largest spike in subscriptions since the early days of the COVID-19 lockdowns in 2020, causing Netflix’s stock price to soar.

The streaming giant’s aggressive measures to crack down on rampant password sharing seem to be yielding fruitful results. Shares in the company surged as much as 18% on Thursday, shortly after announcing immediate price increases for its basic and premium subscribers in the United States, the United Kingdom, and France.

Subscribers to the basic service in the US will witness a $2 increase in their monthly bill, bringing it to $11.99, while premium subscriptions will rise by $3 to $22.99. Basic subscribers in the UK will pay an additional £1, making their monthly cost £7.99, with premium memberships increasing by £2 to £17.99.

Facing a slowdown in subscription growth last year, Netflix made efforts to curb password sharing and introduced ad-supported streaming options. The company announced that these efforts had significantly boosted subscriber and revenue growth over the past two quarters, with a lower than expected “cancel reaction.”

This quarterly increase in subscribers is the most substantial since Q2 2020, a period marked by a surge in sign-ups due to COVID-19 lockdowns.

However, Netflix noted that its advertising initiative has been slower to gain traction and reiterated that ad revenue is not expected to be “material” in 2023. Last month, Jeremi Gorman, who was tasked with building the ad business, left the company and was replaced by former studio operations head Amy Reinhard.

In the third quarter, Netflix reported earnings of $3.75 per share, exceeding Wall Street’s forecast of $3.52. The company closed the quarter with 247 million subscribers, marking an 11% increase compared to the previous year.

Netflix acknowledged the impact of the Hollywood strikes, describing the past six months as “challenging for our industry.” Talks between the actors’ union and a group representing studios and streamers recently fell apart.

Netflix CEO Ted Sarandos expressed his discontent with a “new demand” by the actors’ union, which sought a portion of streaming subscriber revenue. Sarandos referred to this demand as a “levy” and expressed the company’s commitment to ending the strike, emphasising the need to reach a deal that respects all parties involved as soon as possible.

The strikes have caused a $1 billion reduction in investment in new content for Netflix. The company now expects its 2023 cash content spend to be around $13 billion. If the actors’ strike is resolved in the near future, Netflix anticipates increasing its cash content spend to approximately $17 billion in 2024.

Netflix also highlighted its upcoming lineup, featuring the highly-anticipated final season of “The Crown” and the limited series “All the Light We Cannot See,” directed by Shawn Levy.