Netflix Reports 970,000 Subscriber Decline in Q2... Recovery Expected in Q3

[Image source=Yonhap News]

[Asia Economy Reporter Kim Hyunjung] The world's largest video streaming company, Netflix, saw its subscriber count decrease by 970,000 in the second quarter of this year. Although this marks a consecutive decline following the first quarter, the company expects a recovery in the third quarter with an increase in new subscribers.

Bloomberg reported on the 19th (local time) that Netflix announced its second-quarter earnings reflecting this trend. Revenue rose 9% year-over-year to $7.97014 billion, and net profit increased by 7% to $1.44095 billion.

Netflix shocked the market in the first quarter by experiencing a subscriber decline for the first time in 11 years, and this latest report shows a consecutive drop in subscriber numbers for the second quarter. However, the subscriber loss was less than the company's initial forecast of 2 million.

Netflix estimates that new subscribers in the third quarter will reach 1 million, which is expected to offset the subscriber losses from the first half of the year. However, this figure falls short of Wall Street analysts' expectations of a 1.8 million increase.

The region with the largest subscriber decline was North America, losing 1.3 million subscribers, followed by Europe with a decrease of 770,000. Local media attributed this to inflation driving up costs for gasoline and food, making the 'fixed cost' of subscription services burdensome. However, in Asia, including Japan and Korea, subscriber numbers continued to grow, reaching 34.8 million as of the end of June.

With expectations for subscriber recovery, Netflix's stock price rose as much as 8% in after-hours trading.

Netflix is taking measures to maintain profit margins. Between May and June, it conducted two rounds of restructuring primarily in the United States, laying off 450 employees, which accounts for 3% of its total workforce. The company is also reviewing its content production and budget.

It is accelerating the development of an ad-supported service with lower fees. On the 14th, Netflix announced a partnership with Microsoft in the U.S. for this project. According to U.S. research firm Morning Consult, about 60% of American adults prefer a cheaper version of the service that includes advertisements.