Netflix announced a very splashy second quarter, with subscriber numbers and profits both up. After a 2022 packed with mishaps, it’s sure to impress. However, most of this new surge can be laid at the door of their now-notorious password-sharing crackdown rather than any real long-term growth, and it’s important not to get too carried away. Entertainment attorney Brandon Blake, from Blake & Wang P.A., has the full story.
Strong Gains
Their report reveals 5.9M new paying subscribers, alongside $8.2B in revenue and a net income of $1.5B. The bulk of this has been built from their launch of ‘paid sharing’, or the crackdown on the previous free account sharing outside of a single household. Reportedly, cancellations have been low despite the knock to sentiment the crackdown caused.
Netflix’s ad-supported plan continues to do well, too, although it is very much still in its infancy regarding its effect on their bottom line. We can assume the near-global withdrawal of their cheapest non-ad-supported plan in recent months is intended to force budget subscribers to choose the ad-supported plan. This returns Netflix to its rather enviable position in the streaming markets as the only streamer fully in the black, with most others targeting 2024 (at the earliest) for true profitability.
A Note of Caution
Despite an incredibly self-congratulatory accompanying earnings call for the great results, however, it’s worth remembering that some of this sudden resurgence to profitable glory is built off of the back of two circumstances that won’t generate repeat numbers going forward.
Firstly, the lower content costs due to the strike-induced pauses on productions has greatly boosted free cash flow. But without content, there is nothing to drive new subscriptions. Secondly, many of those subscriptions are ‘forced’ from the pool of those who were sharing with others- not a permanently mineable resource, and one that will run dry before the end of the year.
The numbers look great and are worth some celebration. But it’s also worth remembering that this quarter’s results are a little less about smart management and a little more about a confluence of unusual situations that will not sustain growth forever.
Film and Television 