Netflix adds millions of subscribers but growth slows

SAN FRANCISCO — Netflix on Thursday said it added more than five million subscribers in the recently ended quarter but signalled slowing growth.

The streaming juggernaut said it ended September with 282.7 million subscribers, reporting a profit of $2.4 billion on revenue that jumped 15 per cent compared with the same period a year earlier to $9.8 billion.

Netflix shares rose nearly five per cent to $720.75 in after-market trades, trading at slightly more than double the price from a year earlier.

'Squid Game'

Netflix executives expect to end this year strong due to a line-up of coming releases that includes a second season of the global hit "Squid Game."

The dystopian Korean horror tale about a fictional, deadly game show remains by far the most-watched Netflix TV series ever.

Netflix this quarter will also stream a boxing match-up between Mike Tyson and Jake Paul as well as a pair of US National Football League games on Christmas.

"We're really excited about our line-up," said co-chief executive Ted Sarandos on an earnings call.

"We have a culture and operating model that allows us to create stories in more than 50 countries," he added.

Netflix said the average amount of time spent watching its platform grew to about two hours daily per member in the recently-ended quarter, touting a string of hits including "The Perfect Couple", "Emily in Paris," and "Beverly Hills Cop: Axel F."

Sarandos said that its show creators were curious about how they might use artificial intelligence tools.

Easing into ads

The streamer said that membership on ad-supported plans grew 35 per cent quarter-over-quarter.

Netflix next year should reach a scale sought by advertisers in the dozen countries where it offers ad-supported memberships, according to co-chief executive Greg Peters.

"It's worth noting we've got a lot of work still ahead of us to achieve that goal to make our offering better for advertisers," Peters said.

Ross Benes, senior analyst at eMarketer, warned that Netflix will need to be careful not to degrade the experience for viewers as it weaves ads into programming, and forecast that US ad revenue would be a small fraction of the money the company takes in.

In a bid to boost sputtering growth, the company launched an ad-subsidised offering last year around the same time as a crackdown on sharing passwords.

As part of that effort, Netflix also got rid of its cheapest commercial-free plan in the UK and Canada, with expectations of further changes of policy in that vein.

While Netflix gained 5.1 million subscribers overall in the quarter, it was a drop from the 8.8 million subscribers it added in the same period a year earlier, with the boost from its password-sharing crackdown appearing to abate.

"Netflix will eventually shore up its limited ad tier viewership with more partnerships and bundles that incentivize people to choose ad plans," analyst Benes said.

The company also launched an in-house advertising platform so that brands can better optimise its customer data, no longer partnering with Microsoft for that technology.

Investors have cheered on the moves, with Netflix shares gaining ground this year, despite the warnings that subscriber growth would slow.

In the United States, the company has begun to offer some users combined packages with its one-time rivals, making itself available through joint subscriptions with Peacock and Apple TV.

Netflix is seen as reigning supreme over the video content market, with Disney+ still struggling nearly five years after a launch that featured a slew of new content from its blockbuster Marvel and Star Wars universes.