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Netflix shows steady growth amid writers and actors strikes
View Date:2024-12-23 20:46:49
Netflix is showing steady financial growth amid the ongoing Hollywood labor struggles and an overall slowdown in the media marketplace.
The streamer kicked off the media earnings season by announcing its Q2 financials Wednesday.
The streamer's share price stood at $477.59 after the markets closed, roughly double its value a year ago. The company said it added 5.9 million customers during the second quarter. It now has 238.4 million global paid memberships, and its revenue is $8.2 billion.
"We expect revenue growth to accelerate in the second half of '23 as we start to see the full benefits of paid sharing plus continued steady growth in our ad-supported plan," the company wrote in its report.
Paid sharing refers to the company's crackdown earlier this year on password sharing. It now offers plans that enable account holders to add members outside their households for $7.99 a month.
The company's ad-supported tier allows viewers to stream content at a lower monthly price than its ad-free plans. The company said that its ad-supported plan has nearly 5 million global monthly active users.
Netflix announced an end to its cheapest ad-free plan (at $9.99 a month) a few hours ahead of Wednesday's earnings announcement.
"The Basic plan is no longer available for new or rejoining members. If you are currently on the Basic plan, you can remain on this plan until you change plans or cancel your account," Netflix wrote on its website.
"Netflix is continually trying to fine-tune to return the company back to the 15 to 20% growth rates that it had for years," said Andrew Uerkwitz, a senior analyst with the financial services firm Jefferies, of the streamer's recent business decisions. (The company posted single-digit growth for this quarter.)
All eyes are on Netflix right now because the company is profitable, unlike many of its rivals in the media and entertainment space. "Every time Netflix does something, others follow," said Rick Munarriz, a senior media analyst with the investment advice company, The Motley Fool. "It is the ultimate influencer without taking selfies."
But Munarriz said Wall Street overhyped the company's success in the run-up to Wednesday's earnings report.
"The subscriber counts are growing, but right now, Netflix is not generating a lot of revenue," said Munarriz.
Munarriz also noted a downside to the company's free cash flow, which is expected to grow to at least $5 billion this year, up from its prior estimate of $3.5 billion. "So normally you'd think, 'That's great!'" said Munarriz. "But as they explained, part of this is because of the writers' and the actors' strikes, where they're not gonna be investing as much in content, so they'll be saving some money."
The company's profitability does not sit well with the many Hollywood actors and writers on strike. Their unions blame streamers like Netflix for the industry shifts that they say have led to diminishing wages and working conditions.
In a video following the release of Netflix's quarterly earnings report, co-CEO Ted Sarandos said he'd hoped to have reached an agreement with the striking Hollywood writers and actors unions by now.
"We are constantly at the table negotiating with writers, with directors, with actors, with producers, with everyone across the industry," Sarandos said. "We need to get this strike to a conclusion so that we can all move forward."
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