7:35 AM UTC – October 19, 2023
LOS ANGELES (Reuters) – Netflix (NFLX.O) increased subscription prices for some streaming plans in the United States, Britain and France on Wednesday as it shattered expectations for new customers, sending its shares surging 13%.
Almost 9 million subscribers joined Netflix around the globe in the third quarter, surpassing Wall Street analysts’ forecast for 6 million, according to LSEG. Netflix said it expected a similar number of additions in the current quarter.
The strong performance showed Netflix was thriving despite Hollywood labor tensions that shut down a large swath of U.S. production. Netflix makes many of its shows and movies overseas, which accounted for the bulk of its new sign-ups.
Netflix pointed to the global success of “One Piece,” a live-action adaptation of the venerable Japanese manga series and an example of its hefty investment in stories with local resonance that travel the world. The streaming giant also attracted new audiences to long-running television shows, such as the legal drama “Suits,” which it licensed from Comcast (CMCSA.O), and HBO’s World War Two series “Band of Brothers.”
“These are the times I’m glad we have such a rich and deep and broad programming selection,” Netflix co-CEO Ted Sarandos said after the release of the quarterly results. “The same was true during COVID, when we were able to manage the slate through a prolonged and pretty unpredictable production interruption.”
Hollywood’s film and television writers ratified a new contract this month, but actors remain on strike. Sarandos said Netflix was “totally committed to ending this strike.”
The company’s third-quarter customer gains represented its strongest quarterly uptick since the second quarter of 2020, when lockdowns early in the global pandemic led to an unprecedented surge in streaming subscriptions.
Netflix increased the U.S. price of its premium ad-free plan by $3 per month to $22.99. The cost for premium rose by 2 pounds to 17.99 pounds in Britain and by 2 euros to 19.99 euros in France.
Investors welcomed the news, sending Netflix shares climbing to $390.80 in extended trading from a close of $346.19.
PP Foresight analyst Paolo Pescatore said the third-quarter growth at Netflix was a testament to its recent crackdown on password sharing and the opportunities for growth as it moves into advertising.
“It is firing on all cylinders, with recent efforts all heading in the right direction,” he said.
The price hikes were announced in an earnings report that showed the company’s global subscriber base reached 247 million at the end of September.
Substantial subscriber gains came in Europe, the Middle East and Africa, where Netflix added nearly 4 million subscribers. More than 70% of its members now reside outside the United States.
During the quarter, “Suits” became the most-watched title across film, original TV and acquired TV on streaming in the U.S. for 12 straight weeks after it hit Netflix. The series, starring Prince Harry’s wife, Meghan Markle, originally aired on the USA cable network from 2011 to 2019.
“As the competitive environment evolves, we may have increased opportunities to license more hit titles,” Netflix said in its quarterly letter to shareholders.
The company posted revenue of $8.54 billion, in line with analyst forecasts. Earnings came in at $3.73 per share, ahead of Wall Street’s expectation of $3.49.
Netflix’s forecast for fourth-quarter revenue of $8.69 billion was slightly below analysts’ estimates of $8.77 billion.
The writer and actor strikes prompted Netflix to revise its projections on content spending to $13 billion in 2023, assuming the studios reach a settlement with striking actors “in the near future.”
That was down from the $17 billion it expected to spend.
Netflix said it continued to dominate viewership. Netflix programming accounted for 8% of television screen time, second only to YouTube, the company said, citing Nielsen data.
Reporting by Lisa Richwine; Editing by Aurora Ellis, Bill Berkrot and Leslie Adler