Netflix increases the number of subscribers by 2 million, but the problems remain

If we wanted to seek some sort of balance in the data and in the commercial policies of Netflix we have definitely got the wrong company. The latest launches seem to cancel policies and management that seemed established. Let’s look at the data: if no one is surprised by the schizophrenia of the stock exchange where the Netflix shares grew more than 15 percent after the online video streaming giant released its third quarter results, doubts about the future of streaming TV remain.

Hop on and off, Netflix numbers for 2022

In a few months we have gone from the first, dramatic, decline in the customer base toadding over 2 million subscribers in the last quarterreversing the trend of this 2022.

Mind you, a good part of this figure is the recovery of lost numbers, especially in markets far from the “parent company”. In America and Canada the penetration capacity now seems close to its maximum value, so much so that only 100,000 of new customers come from these two countries, while Europe, Latin America and Asia give away hundreds of thousands. In short, the real goal is to find new spaces to occupy. Geopolitics drives the market and that world overlooking the Pacific Ocean is the new land to look to for further growth.

More subscribers, and revenues, but less useful: in search of the paradox

Everything is alright? No. While the increases in monthly fees have greatly helped in revenue growth, third quarter profit fell to $ 1.398 billionor about 50 million less than last year.

Industry experts, such as Lelio Simi, questioned the growth prospects: “Subscribers are growing but at what price for the company? The operating income and the operating margin are clearly down in the forecasts of Q4 2022, even making a year-on-year comparison… ”. Shouldn’t profitability be the new parameter? Let’s take the question our own and see what’s going on.

The difficulties of the sector are known and those of streaming are the evolution with which every established tool on the internet has had to deal with. First a golden period, almost monopolistic (of attention), followed by ruthless competition and the need to continually interest the (paying) public in order to maintain a certain profitability. Sometimes you get to the limit and in more mature markets the saturation always seems to come sooner. Probably also for this reason, Netflix has decided to launch in some countries, including Italy, the new basic subscription with advertising from next November.

Will advertising be enough to save the business?

For the pioneers it is almost an offense, given that – in addition to the commercials – the streaming TV will transmit at 720p, a quality of vision of the past. Reality tells of a complex situation. In Italy, Netflix subscribers in Italy are just under 5 million and a recent survey indicates that, to convert viewers into paying audiences, at least two factors must be considered: the sharing of access passwords that 65 percent of Italian subscribers declare to do at least one other person, and the so-called co-viewieng, or people who watch TV series and movies together on the big home screen. In short, it is not easy to grow. For this reason, “companies have decided to ‘get their hands dirty’ with advertising to correct some problem in their business models, namely the stagnation of sales of its flagship product (Apple), the decrease in the number of its subscribers (Netflix ) or the urgent need to reduce the losses of an expensive publishing project to increase the number of digital subscribers (New York Times / The Athletic) ”, explains Simi.

All this at least until this (more or less rational) choice is profitable, now no surprise if a new way of doing business is chosen in a year. Perhaps the initial one, focusing on the quality of content and competitive prices. Who knows if a return to the past could be the near future.