Netflix this week has detailed revenue, operating income and membership slightly exceeded its forecast in Q3 2022. Subscriber numbers are the highest ever at 223m (up slightly from 221m) with Netflix forecasting 228m for Q4 2022.
Australia had a part to play in that growth, the company reported.
Announcing the results, Netflix listed the quarterly highlights:
• We had big hits across TV and film in Q3 – launching some of our 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
• Our lower priced ad-supported plan launches in 12 countries in November – just six months after our initial announcement. Our existing plans remain ad free.
• Netflix has higher engagement than any other streamer – with room for growth:
• In the UK, Netflix accounts for 8.2% of video viewing, 2.3x Amazon and 2.7x Disney+
• In the US, Netflix accounts for 7.6% of TV time, 2.6x Amazon and 1.4x Disney +, Hulu +, Hulu Live.
Monster: The Jeffrey Dahmer Story. Evan Peters as Jeffrey Dahmer
Netflix calls out loss-making competitors
In a look at the total streaming marketplace, Netflix commented that its competitors are investing heavily to drive subscribers and engagement: “Building a large, successful streaming business is hard – we estimate they are all losing money, with combined 2022 operating losses well over US$10 billion, vs. Netflix’s US$5 to $6 billion annual operating profit. For incumbent entertainment companies, this high level of investment is understandable given the accelerating decline of linear TV, which currently generates the bulk of their profit.”
Netflix then examined its performance: “After a challenging first half, we believe we’re on a path to reaccelerate growth. The key is pleasing members. 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.”
While Netflix doesn’t release individual market data, it did comment on growth in Australia:
“In APAC, revenue grew 19% excluding foreign exchange as average paid memberships rose 23% year-over-year. Average return per member (ARM) was -3% year-over-year, excluding, partially driven by lower ARM in India, somewhat offset by higher ARM in Australia and Korea. We added 1.4m paid memberships in the region (vs. 2.2m last Q3).”
Stanley Tucci in the forthcoming Inside Man
The binge affect: releasing all episodes together works
Netflix commented: “We think our bingeable release model helps drive substantial engagement, especially for newer titles. This enables viewers to lose themselves in stories they love. As the Google Trends chart shows, the ability to watch all of Monster: The Jeffrey Dahmer Story helped drive significant interest in the show.
“It’s hard to imagine, for example, how a Korean title like Squid Game would have become a mega hit globally without the momentum that came from people being able to binge it. We believe the ability for our members to immerse themselves in a story from start to finish increases their enjoyment but also their likelihood to tell their friends, which then means more people watch, join and stay with Netflix.”
Netflix still small relative to opportunity
“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, and Netflix is still very small relative to that opportunity (for example, ~8% of total TV time in the US and the UK, two of our most established countries). In the 190 countries in which we operate, our US$30 billion-plus of annual revenue is roughly 5% of the combined estimated ~$300 billion pay TV/streaming industry, ~$180 billion branded advertising market, and $130 billion consumers spend annually on gaming.
“We believe that we have a long runway for growth if we can continue to improve our offering steadily over time.”
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Top image: Dominic West as Prince Charles and Elizabeth Debicki as Diana in Season 5 of The Crown