Netflix beat Wall Street expectations for earnings per share and subscriber growth in the third quarter, exciting investors (if not consumers) with news of a new round of price hikes.
The company matched Street estimates with $8.54 billion for the period ended Sept. 30. EPS was $3.73 and total subscribers reached 247.15 million, a gain of 8.76 million.
Analysts had forecast 6 million subscribers and an increase in earnings per share of $3.49.
The company has been working to implement two major corporate initiatives in recent months: paid password sharing and ad-supported subscriptions. Significant progress has been made on both fronts. Subscriber growth in the previous quarter largely beat expectations. Because the pricing was cheap for those who were asked to pay to share a password to sign up for a $7 per month ad tier.
In its latest letter to shareholders, the company said subscriptions to the ad program were up 70% sequentially, with 30% of sign-ups in the cheapest ad tier in available countries. Despite those positives, the letter noted, “the company has more work to do to scale this business.” Former ad sales chief Jeremy Gorman left the company last month after reports that the company was taking an earlier position on the ad stack than expected. Corman was replaced by Netflix vet Amy Reinhardt.
Netflix has decided to roll out price increases. The move positions the service as the leader in the overall streaming industry, where price hikes are widespread as new players face the daunting economics of the direct-to-consumer business.
Co-CEO Ted Sarandos stepped into the lead role as strike negotiator, recently participating in a multi-day marathon that ended the 5-month WGA strike and taking on a similar role with SAG-AFTRA. Last week, he said the Guild’s demand for a per-subscriber tax on top of other payments was “far-fetched” after talks with actors broke down. SAG-AFTRA chief negotiator and national executive director Duncan Crabtree-Ireland called the claim “absurd.”
There are many more to come…
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