The very loud sighs residents of Hollywood and Silicon Valley might have heard this afternoon likely came from Netflix execs: The company reported that it had lost 970,000 global subscribers during the second quarter of 2022 — a bad number for Netflix by historical standards but a much better result than it had forecast just a few months ago.
In April, the streamer stunned the industry by saying it expected to lose around 2 million subscribers between April and July, which would have easily been the worst quarter ever for the company since it got into the business of delivering entertainment directly to consumers. But thanks, no doubt, to a strong showing for Stranger Things, the expected nightmare scenario didn’t materialize. While this one result doesn’t erase the many serious challenges still facing Netflix, it might allow it a little more breathing room as it seeks to course-correct.
Today’s report follows what can only be described as six months of hell for Netflix (and Netflix shareholders). The trouble began in January, when the streamer reported strong subscriber growth and revenue for the final quarter of 2021 yet still saw its stock fall by more than 20% the next day. The reason for the decline was that Netflix also admitted growth was starting to slow rather than continuing to accelerate — as it had for much of the last decade.
But the market’s reaction to the January numbers turned out to be a mere prelude to an even bigger correction in the spring after Netflix reported it had lost 200,000 subscribers during the first three months of 2022 and, more worryingly, issued its now-infamous (and on-target/sadly optimistic/overly gloomy) forecast of a 2 million subscriber loss for the second quarter. Within three weeks of that April 19 pronouncement, Netflix shares lost fully half of their value, dropping from $348.61 to $166.37 on May 11. Even that number didn’t capture the scale of the stock collapse: Netflix stock was trading just a few dollars under the $700 mark a few days before Halloween 2021.
Since April, Netflix has been actively working to convince investors (and Hollywood) that it is moving aggressively to adapt to its new normal. The company reversed its long-held opposition to the idea of accepting advertisements on the service and now plans to offer members who want it a lower price tier that includes commercials. Netflix has enacted two rounds of layoffs, resulting in more than 450 staffers losing work, and has signaled that it is looking for ways to cut spending on specific projects (though its overall content spend is not yet expected to be reduced). Netflix now is projecting that it will start growing subscribers again, forecasting it will add 1 million customers by October 1.
As for Stranger Things 4, Netflix needed it to be a big success and it worked hard to make sure it was. In addition to breaking all sorts of records based on the company’s own internal metrics, third parties such as Nielsen and Parrot Analytics have confirmed that the two-part season was huge. Parrot said Stranger Things 4 delivered the biggest number ever for a streaming series in the history of the company’s “demand index,” which measures everything from illegal downloads to social-media activity to track the popularity of titles. Parrot added that during its first month on Netflix, the sci-fi mystery show had 279 percent more demand than the No. 2 streaming original in Parrot’s tally — Amazon Prime Video’s The Boys. Nielsen, meanwhile, said Stranger Things generated more than 165 million hours of viewing in the U.S. during its first ten days of release. (Nielsen’s streaming data includes viewership for past seasons of the show and doesn’t measure audiences outside the U.S.) While this still wasn’t enough to stop the bleeding at Netflix, it’s easy to imagine things would’ve been even worse had the series not kept so many fans engaged.