On July 19, local time, the US streaming giant Netflix (hereinafter referred to as "Netflix") released its second quarter 2023 results report.。

Performance data show that Nafei's second-quarter revenue was 81.$900 million, up 2.7%, below Wall Street's consensus estimate of $8.3 billion。Although revenue fell short of expectations, the realization of earnings indicators exceeded expectations.。Operating profit of 18.300 million U.S. dollars, a year-on-year growth rate of 22.3%; operating margin reached 22.3%, exceeding Netflix's own forecast of 19%。The company reiterated full-year operating margin guidance of 18% to 20%.。Adjusted earnings per share (EPS) of 3.29 dollars, the market expected 2.90美元。

Netflix's shares have risen more than 60% this year。But after the earnings announcement, Netflix's stock fell more than 8% after the session。

      

Behind the substantial increase in subscribers

      

In the first quarter of last year, Netflix reported its first user loss in more than a decade.。For the whole of 2022, Netflix's subscription churn rate is about 37%, with nearly 200,000 users canceling their subscriptions.。Faced with a severe loss of subscribers, Netflix has taken two major steps: first, to launch cheaper service packages with ads, and second, to start restricting password sharing.。

Last November, Netflix launched a monthly 6 in 12 markets, including the United States..$99 ad package option as per month 9.Alternative to $99 ad-free plan。The move not only attracts more customers, but also adds a new source of revenue from advertisers.。

In May, Netflix began cracking down on account password sharing in the United States, the United Kingdom and more than 100 other countries.。In the United States, Netflix subscribers must pay an additional 7 per month if they want to share their passwords..99美元。This action triggered a large number of users to sign up for its cheaper 6.$99 Base Ad Package。

The effect of these two measures is very obvious。By the first quarter of this year, Netflix added a net 1.75 million paid subscribers, and by the second quarter, it added a net 5.89 million subscribers, far exceeding the expected net increase of 2.1 million.。As of the end of June, Netflix had 2 subscribers..38.4 billion。

Maybe I saw the monthly fee of 6.The "power" of the $99 package, released on the same day of earnings, Naifei announced that it will no longer provide 9 per month for new customers in the United States and the United Kingdom..$99 ad-free package。Naifei said that 9.The $99 basic package will no longer apply to new or rejoined members。Users who are already subscribed to the plan can continue to use it until they change or cancel the plan。

At present, Netflix in addition to the monthly fee of 6.In addition to the $99 ad-inclusive package, there is a $15 ad-free package..$49 standard package, plus ad-free 19.$99 Premium Package。

At the same time, Netflix has also decided to expand its password-sharing crackdown, and the company is planning to launch a paid sharing service to almost all remaining countries.。

Despite an 8% increase in the number of users in the second quarter, Netflix's revenue grew by only 2.7%。The company explained that it was mainly due to the impact of foreign exchange rates and price reductions in certain markets.。

Against the backdrop of increased subscribers, the company expects revenue growth to accelerate in the second half of the year.。Expected third quarter revenue of 85.$200 million, compared to an average Wall Street estimate of 86.700 million dollars。With password sharing hit and advertising revenue steadily growing, the company expects a big jump in revenue in the fourth quarter。At the same time, the company expects net subscriber growth in the third quarter to be similar to the second quarter.。

   

Streaming media competition is fierce

   

Behind Netflix's "whatever it takes" competition for users, it reflects the increasingly fierce competition for streaming media in the United States.。

As you can see from the chart, according to Nielsen Research, by June this year, the share of screen time among viewers in the U.S., streaming, had expanded from 26% in May 2021 to 37.7%, a new high。In the streaming media, the proportion of Naifei is 8.2%, second only to YouTube's 8.8%。

Netflix also leads in streaming engagement。According to Nielsen, the company has 24 of the first 25 weeks of 2023 with top US original streaming episodes and 21 consecutive weeks with top US movies.。

Regarding peer competition, Naifei said: "Although streaming is very competitive, we have proven that with strong execution and focus, it can be a great business.。Netflix is already profitable, while its rivals such as Disney + and ParamountPlus are still losing money.。

The company added: "Long-term success requires a combination of entertainment and technology.。We still have a lot to do and we are ready for the challenge。"

However, Naifei is not without "short board"。Compared with other streaming media platforms, Netflix is more "backward" in advertising.。Reed Hastings, former chief executive of Netflix, admitted last year that the company had a late start in advertising because it was largely focused on competition from big tech companies.。Other streaming platforms, including HBOMax, Hulu, Peacock and Paramount +, already offer cheaper, ad-enabled options。

Chief Financial Officer Spencer Neumann previously said: "Our goal is to have advertising make up at least 10% of our revenue and hopefully more over time."。

   

Hollywood strike wave begins to have an impact

    

In addition to the earnings report, the market is also very concerned about the impact of the Hollywood strike wave on Netflix.。

In its earnings report, Netflix's free cash flow in the second quarter reached 13.$400 million, well above market consensus of 5.$4.2 billion。Meanwhile, Netflix raised its full-year free cash flow guidance to $5 billion from the previous $3.5 billion.。The increase in guidance comes as screenwriters and actors go on strike, halting production and cutting spending。However, this may be temporary.。Because when production and operations resume next year, Netflix's free cash flow will likely be affected。But Naifei said the company plans to achieve significantly positive free cash flow in 2024.。

According to a report released by Moody's earlier this week, the Hollywood strike will hit movie theater chains the hardest, while streaming companies like Naifei are in a better position amid prolonged shutdowns。According to Moody's: "Large studios, network owners and streamers with diversity in terms of business, content types (news and sports) or geographic production and libraries and relatively solid balance sheets are at least risk.。"

Currently, streaming media such as Naifei have also been severely criticized by actors.。Now that media and entertainment programs are increasingly using AI in production, actors and writers are fighting for more protection for their rights and interests。But as more and more movies and TV shows go directly to streaming platforms, the benefits of streaming separation are getting higher and higher.。

Actor Sean Gunn said in an interview, "In the past, it was very fair for actors to participate in the profit sharing of the show.。... well, streaming came along and they changed the way the whole business works。According to the negotiating document, the American Actors Guild (SAG) proposed that its members share the revenue generated by the streaming platform in their performances, but was rejected.。

Naifei's co-CEO Ted Sarandos said the company was "very committed" to reaching an agreement with the actors and writers to end the strike as soon as possible.。

"First let me be clear about something.。These strikes are not the outcome we wanted, "Sarandos said on a quarterly call." We've been in talks with writers, directors, actors and producers and everyone in the industry, and we're very hopeful that a deal can be reached now.。"

Sarandos reiterated that the plethora of content resources on Naifei would help the platform cope with the strike, but admitted that "that's not the point."。The real point is that we need to put an end to this strike so we can move on。"