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Investors have worried that Netflix might lose customers if it forced people who were sharing accounts to buy their own subscriptions. But the crackdown has led to a surge in new customers without a major increase in cancellations. Netflix is now on track to add more than 20 million customers this year, a big jump from fewer than 9 million in 2022.
This quarter, Netflix predicts revenue of $8.69 billion and earnings of $2.15 a share, both slightly below Wall Street projections. The company said subscriber additions would be similar to the just-ended quarter, plus or minus a few million.
Cracking down on password sharing is one of a couple major initiatives at Netflix, which is trying to revive growth after a sluggish year or two. The company also rolled out an advertising-supported version of its streaming services in 12 markets. About 30% of new customers in those markets opted for ads last quarter, the company said.
Netflix has returned to growth as many of its peers struggled to figure out their streaming operations. Walt Disney Co., Warner Bros Discovery Inc. and Paramount Global have all cut costs and fired staff to improve their financial performance. They have spent billions of dollars to fund new streaming services that can replace their declining linear TV networks. But most of the newer streaming services lose money.
Cash flow was boosted by the labor stoppage in Hollywood. Management expects $6.5 billion in free cash flow this year, up from a prior forecast of at least $5 billion. This includes about $1 billion less in spending on content due to the strikes.
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The reaction on Wall Street marks the latest indication of a profound shift in investor priorities away from subscriber growth and toward the bottom line, which holds implications for striking writers and actors as well as the shows and movies that end up on screen, experts told ABC News.
A password-sharing crackdown helped the streaming platform add 5.9 million subscribers over the three months ending June, which marked a staggering improvement from the same period a year ago when the company lost nearly 1 million subscribers, Netflix said.
In all, Netflix said it boasts about 232 million subscribers, far outpacing its nearest rival Disney+, which reported just shy of 158 million subscribers in May. (The Walt Disney Company is the parent company of ABC News).
Meanwhile, Netflix's free cash flow -- a measure of how much money is available to a company after it pays for operating expenses -- grew by $1.5 billion to a total of about $5 billion, the company said.
Despite the recent losses, Netflix stock has climbed roughly 44% this year -- a sign that the investor reaction this week suggests a judgment about an overvalued stock rather than an unhealthy company, Luis Cabral, a professor of economics and international business at New York University who focuses on the entertainment sector, told ABC News.
Still, the stock falloff is the latest sign of an industry-wide shift away from the breakneck subscriber growth that marked an early phase in the sector as companies jockeyed to accrue a large customer base that could shoulder out competitors, he said. Now, he added, companies like Netflix need to show that they're actually making money and delivering profits.
That means the companies are less likely to bankroll expensive shows or movies, she added. Some firms, including Netflix, have even imposed layoffs going back to last year as a means of cutting costs.
Viewers should expect a smaller selection of shows even after the calendar returns to normal following the strikes, she added. \"There was this rush to drive content over the last three to five years,\" she said. \"Everybody is going to pull back.\"
If you invest in the stock market, you'll eventually experience emotions of euphoria, greed, fear, uncertainty, and self-loathing. The more emotionally weak you are, the less likely you'll enjoy investing in stocks and holding on for the long term. Losing money in the stock market stinks.
Therefore, I never got the courage to go all-in on stocks after the age of 35. The volatility bummed me out. Instead, I've diversified my net worth into real estate, venture debt, venture capital, and alternatives, while keeping my equity exposure to 35% of net worth at most.
If you invest long enough, you will lose money in the stock market. It is an inevitability. Either the single stock you bought will have a bad quarter or the fresh money you invested into an index ETF will inexplicably start to sell off soon after.
Not only was my Netflix stock down over $50,000 in a day, so were plenty of my other tech stocks and index funds during this latest market correction. Hundreds of thousands of dollars have evaporated into thin air.
Easy come, easy go, as is often the case with investing in stocks. But this time around, something felt different about losing lots of money in stocks. I don't feel the same amount of disappointment as I had in previous corrections. Instead, I feel somewhat apathetic.
If you're feeling bad about losing money in stocks, perhaps some of these tips can help you feel better. The reality is, you could be living with dead money for months or years. Therefore, you've got to figure out a way to move on and live your life.
If you tackle something really difficult and succeed, losing money in the stock market will feel less painful in comparison. You're distracted and engaged. It's the juxtaposition between taking action and being a passive investor that really helps put your stock market losses into perspective.
As a passive investor who has no control over a business, there's nothing you could have done to prevent the losses except to control your asset allocation. Once you give into the mantra of control what you can control, you will experience a nice psychological release.
Further, taking action and succeeding is far more gratifying than making money from stocks. Even if you don't succeed, but cross the finish line with your life intact, that's often good enough to counteract any negative feelings about losing money as well.
On Wednesday night, I got back at 10:30 p.m. because I just played the most difficult league tennis match of my life. I had joined a new team with a new doubles partner. The match was indoors at our opponent's facility. Further, I had never won an indoor tennis match in my 12 years of league tennis. There's something about the lights and faster courts that hurt my ability to perform at my best.
At #1 doubles, my new partner and I were thrown to the wolves. It was the most important position in the lineup because it counted for two points versus one point. The odds of winning were less than 40%, especially against two crafty lefties who had played together for over a decade.
But our opponents regrouped and took the lead in the third set 5-3. The usually noisy indoor club was now quiet as it was 9:40 p.m. Everybody had gone home except for the 12 spectators spread across both teams. At this moment, I told myself that if we lose, it would be OK. I had fought my hardest against a tough opponent.
Miraculously, we were able to fight back to 6-6, which meant it was now time to play a 7-point tiebreaker to determine the victor. We were up 3-1, when once again, Anil decided to smash the ball at me while I was at the net. This time, it was fair play as the ball was going in. Only this time, I was able to get a racket on it. The ball hit the tape and dribbled over! We were up 4-1.
Anil got so pissed that he smashed the ball at the net while I was walking by for changeover at 4-2. It made me flinch, but I said nothing because I wanted to keep the good vibes alive. We had the momentum! Besides, as a father of two, my warring days are over.
I was serving and we were up 6-4 in the tiebreaker. All we needed was to win one more point to win the match! I ended up hitting a solid first serve out wide to Anil. He was forced to pop it up to my partner at the net who proceeded to dump the easy volley into the net! Nooo! Was my 12-year winless curse going to continue?
I ended up going to bed at 2 a.m. that morning because I didn't want the thrill of victory to disappear. But when I woke up, the feeling of triumph was still there. Hopefully this feeling will never go away.
Although this match might sound trivial to you, to me, it was an uncomfortable activity that filled me with excitement. Most of my tennis friends aren't willing to play USTA league tennis because they don't want to be put in a stressful situation.
Had my partner and I lost our match, our team would have lost 2-3. Further, our wins and losses are all memorialized on the internet for all of the tennis community to see. So if you are a loser, everybody will know. As a result, most tennis players don't play league tennis. It's just too stressful.
Winning this match successfully negated the pain of me losing $50,000 in Netflix stock. Sure, I could have sold the stock earlier to avoided losses. However, I've held the stock for 10 years already. Netflix was our saving grace during the pandemic. I'm happy to hold on for a lot longer.
If you have more than 50% of your net worth in one asset class that is tanking, you will likely feel a lot of pain and fear. As a result, by the time you reach a minimum level of financial independence, I recommended keeping any risk asset to less than 50% of your net worth.
Sure, you may miss out on some further gains if stocks outperform other asset classes. However, you'll also minimize the volatility in your net worth as well as any emotional damage. Of course, if you have diamond hands, feel free to concentrate your net worth all in stocks or whatever risk asset of choice.
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