Stranger Things helps Netflix slow the bleeding

Netflix lost 1.3 million customers in the US and Canada, its largest region, and another 770,000 in Europe, the Middle East and Africa, its second-largest. Those are the steepest quarterly declines the company has reported in either place since it started breaking out those markets.

Growth in the Asia-Pacific region offset those declines. Netflix added 1.1 million customers in APAC, after cutting prices in India.

Chairman Reed Hastings long positioned Netflix as an advertising-free alternative to cable TV, but now says commercials are necessary to appeal to people who find the service too expensive.

Release strategy

Netflix has raised prices several times and is now one of the most expensive streaming services. The company will introduce the advertising-supported option in a handful of countries later this year, and just tapped Microsoft to handle ad sales and technology.

Netflix has also started to release new episodes of shows in batches, breaking with its tradition of dropping every episode of a season at the same time. It released the final season of the drama Ozark and Stranger Things in two batches.

The batching strategy allows Netflix to extend the life of its biggest shows. When every episode is released at once, the majority of the viewership happens in the first couple of weeks. The number of people who cancel Netflix has jumped 87 per cent since a year ago, according to Antenna.

The popularity of the fourth season of Stranger Things exceeded the expectations of Netflix executives. The supernatural drama has been one of the service’s most popular titles since its debut in 2015, and turned star Millie Bobby Brown into one of the most in-demand actresses in Hollywood.

The release of Stranger Things meant that fans who had Netflix in the second quarter would want to keep the service until the start of the third quarter to finish the season. The company is looking to turn hits like Stranger Things into franchises that can outlast any individual show. The creators of the show are developing a spin-off series, and Netflix has also announced plans for a Broadway play.

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Total subscribers in the second quarter came to 220.7 million, compared with estimates of 220.2 million. Earnings of $US3.20 a share beat analysts’ projections.

This quarter, Netflix forecasts revenue of $US7.84 billion, shy of Wall Street estimates of $US8.1 billion. The company sees earnings of $US2.14 a share, compared with estimates of $US2.72, and says total membership will reach 221.7 million, also shy of estimates.

Bloomberg

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