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Netflix lost almost 1 million subscribers, and this is considered good news

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Netflix lost fewer than feared subscribers in the latest quarter, reporting a significant drop in subscribers overall, but only after warning it would suffer a sharper drop.

Earlier this year, Netflix reported its first drop in subscribers in more than a decade, a drop that should have heralded an even deeper drop in subscribers. But NetflixThe still-dominant video streaming subscription service in the world, reported that the number of subscribers fell by 970,000 to 220.67 million from April to June, according to a report for the second quarter on Tuesday.

It’s still the deepest drop in membership the company has ever reported, but it beats Netflix’s forecast in April that the company would lose 2 million members worldwide. (According to the Refinitiv poll, analysts on average were close to their estimate of Netflix’s forecast.)

“It’s kind of hard to lose 1 million and call it a success,” Netflix co-CEO Reed Hastings said late Tuesday during a recorded discussion of the results. “But in fact, we are set up very well for next year.”

However, Netflix’s Q3 forecast fell short of analysts’ expectations, with Netflix predicting it would gain 1 million subscribers, compared to the consensus estimate of a 1.8 million subscriber increase.

Investors welcomed the news anyway after Netflix’s share price plummeted this year. Shares of Netflix rose 4% to $209.72 in recent pre-market trading on Wednesday. But the stock has lost two-thirds of its value this year as Netflix’s sudden membership cut has eroded its status as a Wall Street darling and also shattered Hollywood’s confidence in streaming as the engine of the future of television.

Years of steady growth in Netflix subscribers have spurred nearly every major Hollywood media company to pour billions of dollars into their own streaming operations. These so-called streaming wars have resulted in a wave of new services including Apple TV Plus, Disney Plus, HBO Max, Peacock and Paramount Plus – a flood of streaming options that have complicated the number of services you have to use (and often pay for) to watch your favorite shows and movies online.

Now, sensing the heat of intensifying competition for your attention and subscription, Netflix is ​​pursuing strategies that have been abandoned for years.

First, the company plans to launch cheaper, ad-supported subscriptions. While Netflix has paved the way for streaming TV, its “only ad-free” strategy has lagged behind industry standards. As new competitors launch, they set up memberships that give viewers like you more options. Now, most of Netflix’s competitors have a tiered model, usually offering cheaper ad-supported memberships as well as more expensive ad-free subscriptions.

Netflix is ​​also testing password sharing fees, aiming to reach over 100 million households that already watch Netflix but don’t pay for it directly.

For now, these experiments are limited to Latin America, but Netflix has said it plans to implement an account-sharing fee structure in 2023.

Two schemes are currently being tested. First, Netflix charges for adding additional memberships as official “child” accounts. Netflix then said it would be trying a new method from next month that would charge for adding extra “homes” where you can stream Netflix in addition to one main residence, with a limit on how many extra homes you can add depending on how much you’re already paying for Netflix.

Elsewhere in its report, Netflix said memberships in the US and Canada, its largest single region (so far), were down 1.3 million to 73.28 million. Subscriptions also fell in Europe, the Middle East and Africa, down 770,000 to 72.97 million.

But in Asia Pacific, Netflix added 1.08 million subscribers, reaching 34.8 million, while in Latin America, the company added just 10,000 new members, for a total of 39.62 million.

Overall, over the most recent period, Netflix reported a profit of $1.44 billion, or $3.20 per share, up from $1.35 billion, or $2.97 per share, a year earlier. Revenue rose 8.6% to $7.97 billion.

Analysts on average had expected earnings per share of $2.75 and revenue of $8.04 billion.

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