Netflix turns decline upside down with help from Stranger Things

17 Oct 2019131 Views

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After a scary quarter that showed Netflix could be facing serious challenges ahead, hit series such as Stranger Things helped bolster its numbers.

In July, shares in Netflix tumbled after its earnings report for Q2 showed overall subscriber growth was almost half of its expected figure, with the streaming service losing a total of 126,000 subscribers in the US.

However, since then, the latest season of the smash hit Stranger Things and other new content was released, and with it came a seemingly more positive outlook for the company. Netflix’s report for this quarter certainly surprised market analysts, according to Business Insider, with shares up by as much as 10pc in after hours trading yesterday (16 October).

This was largely down to Netflix posting a profit of $665m for the quarter, or $1.47 a share compared to $0.89 during the same period last year. Its total revenues were $5.25bn, bringing it in line with forecasts from market analysts and the company itself.

In terms of subscriber numbers, the streaming giant pulled in 6.3m new subscribers from outside the US, which is higher than the 6m that analysts predicted. However, Netflix continues to struggle in its home market, adding just 500,000.

Netflix subscriber chart.

Image: Statista

‘Netflix has defied the naysayers’

This will be the last year that Netflix reports on the US alone, it said in a statement, having taken the decision to report going forward based on four regions: the US and Canada; Asia Pacific; Europe; and the Middle East and Africa.

In attempting to explain its poor performance in Q2, Netflix said that it was partly down to not delivering on content over that time, but has made up for it with a string of new releases, notably new series of Stranger Things and Orange Is the New Black .

This will also be the last earnings report ahead of the launch of a number of platforms from Netflix’s biggest competitors, such as Disney Plus and Apple TV Plus, resulting in it lowering its subscriber expectations for 2019 from 28.6m to 26.7m.

Speaking to CNBC about how Netflix fared, Tim Nollen and Jordan Boretz of Macquarie Research said much of its future success will likely be pinned on international growth.

“In some ways Netflix has defied the naysayers in Q3, coming close enough to guidance and delivering impressive revenue and earnings growth,” they said. “We still think its opportunity is excellent, especially internationally where sub adds should continue to step up. But it’s hard to deny the US is maturing.”

Colm Gorey is a journalist with Siliconrepublic.com

editorial@siliconrepublic.com