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Netflix is yielding lesser subscribers than anticipated and says a cheaper ad tier is arriving in 2023

Netflix is yielding lesser subscribers than anticipated

July 21, 2022: -Netflix shares jumped after the company said it lost lesser subscribers during the second quarter.

The streamer said it aimed to reveal its lower-cost, ad-supported tier in early 2023. This comes on the heels of Netflix, which dabs Microsoft as its partner on the ad-supported offering.

“We will likely start in a handful of markets where advertising spending is significant,” the company said in its shareholder letter. “Like most new initiatives, we intend to roll it out, listen and learn, and iterate quickly to improve the offering. So, our advertising business in a few years will likely look quite different than it looks on day one.”

Last quarter, Netflix warned investors that it expected to shed around 2 million subscribers but only yielded around 970,000 during the three months ending June 30.

The company presently holds 220.67 million subscribers and expects net ads to reach 1 million in the third quarter, reversing some losses in the year’s first half. Analysts had predicted Netflix would guide for growth of nearly 1.8 million.

Netflix noted that it is in the early stages of its paid sharing plan. This effort mentioned last quarter would upcharge a few members for sharing their subscription with family members or friends that live outside their homes. The company says it is examining two different approaches in test cases in Latin America that can inform a wider rollout in 2023.

The company is warning of the strengthening U.S. dollar’s impact on its international revenue, making it up 60% of its top line. The dollar’s surge comes as the Federal Reserve hikes interest rates to fight four-decade-high inflation in the U.S.

In the last quarter, Netflix is addressing its slowing revenue growth, which resulted from the competition, account sharing, and other factors like sluggish economic growth and the war in Ukraine.

“We’ve had more time to understand these issues, as well as how best to address them,” the company said.

It remains focused on content, which offers big-budget films on its service rather than in theaters and provides all episodes of new shows all at once for subscribers to binge. The company is touting “Stranger Things” season four as a big win for the brand. Not that did it top viewership records for the company, but it was also nominated for several 2022 Emmys.

Netflix’s shares, which traded at around $700 last year, closed Tuesday at just above $200.

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