Netflix hails end to shrinking subs in Q3 2022 | Major Businesses | Business | News | Rapid TV News
By continuing to use this site you consent to the use of cookies on your device as described in our privacy policy unless you have disabled them. You can change your cookie settings at any time but parts of our site will not function correctly without them. [Close]
In what is a huge sign of relief for the subscription video-on-demand industry leader, and perhaps the SVOD market in general, Netflix has revealed that after what it conceded was a challenging first half, it is now on a path to reaccelerate growth with third quarter 2022 revenue, operating income and, most importantly, memberships exceeding forecast.
Netflix office 20Oct2022
For the quarter ended 30 September 2022, Netflix announced that it had seen 6% year-over-year revenue growth driven by a 5% increase in average paid memberships and a 1% rise in average revenue per member (ARM). Revenue for the quarter totalled $7.926 billion, driving operating income of $1.578 billion at a margin of 19.3%. Net income totalled $1.398 billion.

Having seen net memberships slide over the first two quarters of 2022, it was back to subs growth with global streaming paid memberships totalling 223.09 million, up 4.5% yearly and rising 2.41% in terms of global streaming paid net additions.

Excluding the impact of foreign exchange (F/X), revenue and ARM grew 13% and 3 8% year-over-year, respectively. The company attributed the sequential decline in revenue as entirely due to F/X. It said that it had under-forecasted paid net additions, which totalled 2.4 million compared with 1.0 million forecast and compared with 4.4 million in the year ago quarter.

Looking regionally, in the US and Canada, the company’s most penetrated market, ARM and revenue grew by 12% and 11%, respectively, excluding F/X. Paid net adds totalled just 100,000 a similar to that reported a year ago. Excluding F/X, EMEA revenue and ARM grew 13% and 7%, respectively. Paid net adds totalled 600,000 compared with 1.8 million in the year ago quarter. In APAC, revenue grew 19% excluding F/X as average paid memberships rose 23% year-over-year.

Yet ARM dipped 3% year-on-year, excluding F/X, partially driven by lower ARM in India, somewhat offset by higher ARM in Australia and Korea, and Netflix added 1.4 million paid memberships in the region after registering 2.2 million in the previous third quarter. In LATAM, revenue increased 19% year-over-year, supported by ARM growth of 16% vs. the year ago quarter excluding F/X. It added 300,000 paid memberships, in-line with membership growth in Q3’21.

Netflix attributed the growth that it had in the quarter to ‘big hits’ in both TV and film launching what it said were some of its most watched series and films of all time, including: Monster: The Jeffrey Dahmer Story, Stranger Things S4, Extraordinary Attorney Woo, The Gray Man, and Purple Hearts. “The key is pleasing members,” the company told shareholders. “ It’s why we’ve always focused on winning the competition for viewing every day. When our series and movies excite our members, they tell their friends, and then more people watch, join and stay with us.”

Netflix also claimed that despite competitors investing heavily to drive subscribers and engagement, building a large, successful streaming business is hard and that we estimated rivals were all losing money, with combined 2022 operating losses well over $10 billion compared with its $5 to $6 billion annual operating profit. Netflix also stated that it had higher engagement than any other streamer – with room for growth. In the UK, Netflix said it accounted for 8.2% of video viewing, 2.3x that of Amazon and 2.7x that of Disney+. In the US, Netflix said it accounts for 7.6% of TV time, 2.6x Amazon and 1.4x Disney + Hulu + Hulu Live.

Going forward, the company looked forward to the launch of its lower priced ad-supported plan launches in 12 countries in November but warned that the steady appreciation of the US dollar remained a significant headwind for all US-based multinationals.

For Q4’22, it was expecting revenue of $7.8 billion with the sequential decline entirely due to the continued strengthening of the US dollar vs. other currencies. On a constant currency basis, this equated to 9% year-over-year revenue growth. Revenue growth forecast was driven by an expectation for 4.5 million paid net adds compared with 8.3 million in Q4’21 and ARM growth of 6% year-over-year, excluding F/X. While “very optimistic” about the new advertising business, Netflix did not expect a material contribution in Q4’22 as it was launching its Basic with Ads plan package intra-quarter and anticipated growing its membership in that plan gradually over time.