Beating its own projections, Netflix increased its number of paid subscribers by 2.41 million in the third quarter of the year, in what may be considered a massive win for the U.S. streaming giant which lost over a million subscribers in the first and second quarters.
Worried by its struggles reflected in declining subscribers and low stock, the company had in July projected the addition of just one million new subscribers by the end of Q3 2022, which was quite understandable if one put Netflix’s situation at the time into consideration.
In April, Netflix’s stock price dropped by 35 per cent (%) in April, erasing $50 billion from the company’s value. Earlier, Netflix’s total revenue for the first quarter of 2022 increased nearly 10% to $7.87 billion, falling short of analysts’ expectations of $7.93 billion.
Growth in the face of competition
In its October 18 earnings letter to shareholders, Netflix disclosed that it managed to double its own growth projections, bringing its total number of users to 223 million.
This feat may not be unconnected to the company’s decision to introduce a lower-priced ad-supported subscription plan for consumers, in partnership with Microsoft. Recall the streaming giant said it plans to launch a cheaper, ad-supported plan in early 2023.
Though Netflix prides itself as the pioneer in the streaming service space, the company faces a huge threat from other competitors such as Amazon Prime Video, Disney+, HBO/HBO Max and Hulu, who are ramping up their subscriber numbers to give Netflix a run for its money.
For instance, Disney+ recently announced that its total subscriptions had reached 152.1 million. When you add up Hulu’s 46.2 million subscribers and ESPN+’s 22.8 million, it means the company boasts a total of 221 million subscribers.
In Africa, it’s a streaming war
Even Africa, where Netflix supposedly holds sway save for Showmax which is said to dominate the market, is gradually slipping away from its grip.
In 2016, the streaming service found its way onto the shores of Africa, with its major appeal being telling African stories with African voices. But between then and now, its direct competitors — Amazon Prime Video and Canal+ — have equally cemented their places in the continent, birthing what has been tagged a “streaming war”.
In August, Amazon Prime Video launched a localised version of its service in Nigeria, Africa’s biggest market.
Netflix, expectedly, isn’t sleeping, as it continues to invest in more local content. “There’s a curiosity across the world about locally-specific shows from Africa — great creative, great stories. The world wants to know what’s happening in Africa,” Dorothy Ghettuba, Netflix’s director of local language series for Africa, said in a recent interview.
No wonder business intelligence company Digital TV Research projects that Netflix will increase its subscriber base in Africa from 2.6 million to 5.8 million by 2026.
But, Netflix remains optimistic
But it appears that the rising competition isn’t playing on the mind of Netflix which seems to be more concerned with growing its revenue.
For the last quarter of the year, the streaming giant projects revenue of $7.8 billion “with the sequential decline entirely due to the continued strengthening of the US dollar vs. other currencies”.
“The fourth quarter is typically our lowest operating margin quarter of the year as it’s usually our largest quarter in terms of content and marketing spend. In addition, the aforementioned F/X impact has a high flow through to operating income (~75%-80% of the revenue impact) as most of our costs are in US dollars. Excluding the year-over-year impact of F/X, our Q4’22 operating margin forecast would be 10% vs. 8% in Q4’21,”– Netflix added in the earning letter.
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