Netflix announced its earnings for the third quarter, showing an acceleration in subscriber growth after a disappointing first half of the year for the company. In detail, the streamer added 4.4 million new subscribers during the period for a total of 214 million paid subscribers, topping the company’s modest projections set last quarter for a net subscriber add of 3.5 million.
This was mainly fueled by a robust slate of content, especially the release of Netflix's hit Korean television show "Squid Game". The series is expected to be worth nearly $900 million to the streaming giant, after costing just $21.4 million to produce, according to a Bloomberg. Moreover, a record 142 million people watched the show in its first four weeks, exceeding a previous viewership record following the release of "Bridgerton".
When it comes to territories, Asia-Pacific was the largest contributor to Netflix’s subscriber growth, with the region accounting for 2.2 million of the quarter’s net subscriber adds. Meanwhile, Europe, the Middle East and Africa contributed 1.8 million subscribers for the quarter. In Latin America, the platform added around 300.000, while United States/Canada accounted for roughly 70.000 new paid subscribers, bouncing back from last quarter’s loss of around 400.000.
Regarding financials, revenue in the third quarter hit $7.5 billion, which represents a 16% year over year growth and a slight increase from the previous quarter. Average revenue per user in the United States and Canada saw a slight increase in Q3, hitting $14.68. In the previous quarter, the company reported earnings of $2.97, up 86.8% from the prior-year quarter, but missed the consensus estimate of $3.15. On the other side, net revenue jumped 19.4% to $7.34 billion and marginally surpassed analysts’ expectations of $7.32 billion.
● DEMAND FOR ORIGINAL CONTENT
According to data from Parrot Analytics, for the third straight quarter, Netflix’s share of global and US demand for digital originals has hit a record low, down to 45.8% globally and 43.7% in the United States. In Q2 2021, Netflix was at 48.3% globally, and 46% in the United States.
The total global demand for Netflix originals did grow 3.3% compared to Q2 2021, and is up 74% since Q2 2019. However, global demand for original content from Netflix’s competitors grew 14.3% in Q3 2021, and is up 196% since Q2 2019 - before competitors like Disney+, HBO Max, and Apple TV+ entered the market.
“This matters because demand for original content is a key leading indicator of subscriber growth, so Netflix may be able to grow its subscriber base while its dominant position in the market continues to erode. The streaming pie is growing even if Netflix’s slice is shrinking,” Parrot Analytics noted.