Feb. 14, 2023

Netflix subscribers soaring past expectations

Global streaming service Netflix ended the year with more than 230 million worldwide subscribers, beating analysts' expectations. K Dass reports.

2022 was a tough year for many entertainment operators but the global streaming giant posted added subscribers that blew past even the most optimistic expectations. The streaming giant said it enticed 7.7 million new members in three months, taking Netflix its worldwide membership to over 230 million subs.

Netflix praised a successful slate of new content that included horror-themed comedy Wednesday, saying that the Addams Family spin-off was the company's third-most popular series ever. Royal tell-all documentary Harry and Megan also scored, Netflix said, as well as Glass Onion: A Knives Out Mystery starring actor Daniel Craig.

Analysts say this is a stark contrast to the first half of the year. Creating the next biggest block buster drives subscribers. Its fresh titles helped attract users to a new lower-priced “Basic with ads” subscription as consumers cut back on their soaring inflation and an uncertain economy. However, revenue between October to December period, at US$ 7.85 billion (S$10.4 billion), was in line with estimates and helped send Netflix shares up by more than 6% after the announcement.

 

 

Netflix insists that counting new users is no longer the most important criterion for assessing the company's health and that revenue should instead be the main metric. According to Insider Intelligence analyst, what may be getting lost is that some number of new subscribers. No one will know how many - likely came in on Netflix's ad-supported tier. Meaning, most likely, lower average revenue per subscriber, which is a measure Wall Street will be paying more attention to as Netflix's ad businesses scale up.

Netflix's subscribers count took a hit in 2022, but it is recovering. Netflix's subscriber growth in 2022 hasn't been great. The company had predicted that it would add 2.5 million subscribers in Q1 of 2022 but instead, it lost around 1170 million subscribers in the first two quarters of 2022. The good thing is that Netflix is recovering from these losses, according to the Q3 reports to its shareholders, Netflix now has 230 million paid subscribers. It means the subscribers count raised by 2420 million in the third quarter of 2022. Netflix lost worldwide streaming subscribers in the first quarter of 2022 for the first time since the third quarter of 2011. The interruption of service in Russia accounted for a loss of 0.7 million subscribers. Netflix Inc reported that inflation, the conflict between Russia and Ukraine, and tough competition have led to their recent subscriber loss. The streaming giants lost over a couple of million followers in the first two quarters of 2022. In its last shareholder letter, Netflix revealed that it would have 221.67 subscribers by Q3 2022.

Due to losses in its subscriber base recorded in the first half of 2022, Netflix introduced an ad-supported tier in November 2022 to offset customer and revenue declines. Indeed, a survey from October 2022 showed that one third of U.S. Netflix subscribers would likely switch to the ad-supported tier. Furthermore, while the subscription revenue of the streaming provider is expected to decline in the years to come, the advertising revenue is forecast to increase, showing the high value of hybrid business models to the streaming market these days.

Most Netflix subscribers are based in the EMEA region (Europe, Middle East, and Africa), accounting for over 76 million of Netflix's total global subscriber base. Subscribers are from diverse ethnic backgrounds - data on Netflix subscribers by ethnicity found that more Hispanic and African Americans watch Netflix than their white counterparts. Additionally, openly published data on the gender of Netflix employees in 2021 revealed that the company performs extremely well in terms of achieving an even split. Perhaps unsurprisingly, Netflix appeals to all age groups and a survey showed that the majority of adults aged 18 to 54 years old subscribed to the service.

Here is a table showing Netflix Subscribers by region:

World RegionNetflix Subscribers in 2022

Europe, Middle East, and Africa73.53 million

U.S.A. and Canada73.39 million

Latin America39.94 million

Asia Pacific36.23 million

After years of standing alone as the world's premier streaming site, Netflix now faces strong competition from deep-pocket rivals, including Disney Plus, which has also introduced as ad-based subscription. But despite the new challengers, Netflix is one of the rare tech giants to have garnered confidence from Wall Street, with its share price up almost 50% in the past six months.

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