Netflix Has Had a ROUGH Year — Is It Getting Better?

After a long day of work, one of our favorite things to do is sit on the couch, put our feet up, and zone out while watching TV. This seems like the most casual activity possible, but the consumer’s choice of which TV show to watch, which streaming service to use, whether or not to pay for ads, and how often to turn on their favorite shows has a major impact on some of the biggest names in media.

Disney has recently been putting a big emphasis on Disney+, the company’s relatively new streaming service. They’ve entered a streaming war that already has players like Amazon Prime, Paramount+, and Netflix. Although this competition has generally been dominated by Netflix, that company has been struggling over the past few months. Is Netflix still hurting for subscribers? Or could their most recent news mean that things are finally looking up?

Netflix’s Recent Struggles

2022 has not been kind to Netflix so far. Their woes seemed to start at the beginning of this year, when the company reported its biggest loss of subscribers in 10 years. Over 200,000 customers left in the first quarter of 2022, and analysts predicted that the losses wouldn’t end there.

As a result, Netflix’s shares dropped 40% after that announcement. Netflix initially blamed the drop in subscribers on password sharing, price increases, and more competition in the streaming world.

Just a couple of months later, Netflix’s shares had dropped by about 70%, and the company laid off about 300 employees. A Netflix spokesperson said, “While we continue to invest significantly in the business, we made these adjustments so that our costs are growing in line with our slower revenue growth.”

Again, analysts predicted that the situation would only get worse. They were somewhat correct, as Netflix reported a loss of 970,000 subscribers in the 2nd quarter of 2022 (in July). This number was still high, but nowhere near the expected 2 million that many analysts predicted would leave the service.

As a result of the better report, investors were pleased with the numbers, and shares increased by about 8%. Big shows like Stranger Things have been cited as contributing to the more optimistic outlook. Interestingly, Netflix did not lower its spending budget for content as much as some predicted it would (or should). The company’s commitment to creating new content may be helping to pull it back to its former status as an unstoppable streaming giant.

They have, however, continued to lay off employees periodically, with 30 animators being laid off in September of this year.

So how is Netflix doing now? Surprisingly, much better than some expected.

Things Are Looking Up

After 2 bad quarters, Netflix has reported that its 3rd quarter of 2022 has been more positive. According to CNN, Netflix reported an increase in subscribers by 2.4 million in the third quarter. This more than doubled the expected 1 million subscribers. Netflix also said that 4.5 million more subscribers would be added in the 4th quarter, again exceeding the expectations for this year.

That puts Netflix’s current subscriber number at 223 million worldwide. The company’s shares increased by 13% in response to this news.

Overall, Netflix made about $1.3 billion in profit this past quarter, which is just a bit under the $1.4 billion that the company made this time last year. Revenue, however, was up about 6%.

Netflix told its shareholders, “After a challenging first half, we believe we’re on a path to reaccelerate growth.”

Some of the factors that may have helped with the turn-around could include continued interest in big-name shows (the recent documentary Monster: The Jeffrey Dahmer Story was particularly popular) and the announcement that the ad-supported tier would launch in 2022.

The new ad-supported tier will cost $6.99/month in the U.S., and it’ll launch on November 3rd (over a month before Disney+ launches its own ad-supported service). The inclusion of ads has been promising to shareholders, as this will bring in more revenue to the company. In addition, the lower price may appeal to more consumers, which could bring in more subscribers.

Netflix is still looking ahead cautiously. A representative said, “As we’ve long said, we operate in a highly competitive industry, where people have many different entertainment choices — from linear TV to streaming, YouTube to TikTok, and gaming to social media. The silver lining is that the opportunity is very large and growing.”

So Netflix is doing better on its own, but how does it compare to other streaming services, specifically Disney-owned services?

How Does It Compare to Other Streaming?

Compared to Disney+ and Hulu, Netflix still has more subscribers, at 223 million worldwide. Disney+ most recently reported a total of 152.1 million subscribers, and Hulu is currently sitting at 46.2 million.

However, Disney+ and Hulu have both had a better year overall than Netflix in terms of growth. Disney+ gained 14.4 million subscribers in the 3rd quarter of 2022, which was a huge gain compared to the modest 2.4 million increase that Netflix reported recently. It’s important to note that Disney+ is still a relatively new service, which means that it’s growing faster now than it will be in several years. This advantage could account for the difference in subscriber growth, and Netflix is a much more established service.

In the previous quarters, Hulu has continued to see growth, albeit not at the same rate as Disney+. (Like Netflix, Hulu has been in the game longer than Disney+, which may partially explain this difference). The company added 0.6 million subscribers in the third quarter of 2022, which isn’t much but is still positive growth. Compared to the same time in 2021, Hulu subscriber numbers increased by 3.4 million.

Netflix certainly stumbled this year, but when analyzing the total number of subscribers, the company can still claim to be one of the biggest names in streaming, if not the absolute biggest. If things continue to look up for this service, that title will be difficult for competing companies to steal.

We’ll continue to watch for the latest updates when it comes to streaming, so stay tuned with AllEars for more news.

Click here to learn more about the ad-supported tier coming to Netflix.

What’s your top go-to streaming service? Let us know in the comments!

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