Netflix Adds 2.4 Million Subscribers. Is It Enough To Silence Critics?

After two quarters of not-very-good news, NetflixNFLX
had something to celebrate during Tuesday’s third-quarter earnings call. The big question is whether this good news is the blip or those previous six months of bad news were the blip. Will subscriptions continue to peak or dip back into the valley? Though Wall Street seemed pleased Tuesday evening, the company still faces a lot more questions in the coming months.

Netflix announced subscriber growth that outpaced its projections as well as analysts’ expectations. It added a healthy 2.4 million subscribers, more than doubling the roughly 1 million the company had predicted.

That more than offset the losses of the past two quarters, including 970,000 in second quarter and 200,000 in first quarter, which marked the first time in a decade the streamer lost subscribers.

Looking ahead, Netflix appears optimistic. It projects an additional 4.5 million subscribers during fourth quarter, with revenue hitting $7.8 billion, the latter on par with third quarter. The company also knows where it shines. It said it would stop providing forecasts for customer growth going forward, instead preferring to focus on the dollars.

It pointed out in its letter to shareholders that it has an operating profit of more than $5 billion, contrasting with competitors who are still losing money.

Of course, buzz and perception make a difference in any industry—and some money-losing competitors have still made a splash. Tuesday’s results reflect in many ways how far Netflix has come. Once the entertainment disruptor that sent Blockbuster to its demise, Netflix is a relative grandpa in the new streaming landscape, and it’s hard for grandpas to be seen as hip. Still, when grandpa has the cash, does perception really matter? Netflix co-founder Reed Hastings might argue it doesn’t.

Here are a few fundamental issues facing Netflix now that it has returned to subscriber growth.

The Outlook For The New Advertising Tier

The company introduced details about the new tier earlier this month. The ad-supported version rolls out next month, and Netflix forecasts gradual growth for the much-cheaper option. It also pointed out that subscriptions can rise and fall based on content. Smashes such as Bridgerton, Squid Game and Stranger Things bring new subscribers to the platform, and people might be more willing to sign up with the inexpensive option (especially after Netflix raised prices on other subscriptions earlier this year).

Whither U.S. And Canada Subscriptions?

While Netflix could crow about massive growth in Asia Pacific, where it added 1.43 million subscribers in third quarter, its North American results were far less rosy. It picked up only 100,000 subscribers, making it the slowest-growing region in the world.

The Competition Remains Fierce

Though Netflix may poo-poo the achievements of its rivals, it’s clear the streaming wars aren’t settled. Disney+, in particular, has seen a lot of success, with arguably the most mass-appeal content of any streamer. While Gen Z adores Stranger Things and adults 18-49 love HBO Max’s House of the Dragon, nothing beats the wide demographic pull of a classic Disney show or a Marvel movie—both of which are on Disney+.

Password Sharing Is 2023’s Project

Netflix has been promising a crackdown on password sharing for months, and apparently that will begin in earnest next year, after several months of testing methods in Latin America. It will make those who’ve been password sharing with friends and family create paid subaccounts. The company didn’t say how much the subaccounts would cost.