Netflix added nine million subscribers in the third quarter and saw a year-over-year increase in revenue despite strikes by Hollywood writers and actors that brought the entertainment industry largely to a standstill.
Netflix’s revenue hit $8.5 billion in the quarter, the streaming company said in an earnings announcement on Wednesday, up 8 percent from the same time last year. The increase was credited to a better-than-expected growth in subscribers. It now has 247 million subscribers worldwide. The company’s net income was $1.6 billion, up close to 20 percent from the third quarter in 2022. The company is expected to spend some $13 billion on content this year, down from $17 billion, because of the writers’ strike, which recently concluded, and the ongoing actors’ strike.
Netflix also said that it was raising the monthly subscription price for its premium ad-free service in the United States from to $22.99 from $19.99. It will also raise prices in the United Kingdom and France.
The premium service can be used on four devices at one time. The monthly price for the standard ad-free service, which can be used on two devices at once, will stay at $15.49.
Analysts attributed the increase to an effort by Netflix to lure more people to its less expensive service ($6.99 a month) that includes advertisements, which generates additional revenue.
“Yes, raising prices will boost revenue for streaming services in the short term, but overusing this marketing lever isn’t sustainable, as consumers expect value: great content at a fair price,” Mike Proulx, a vice president and research director at Forrester Research, wrote in a report. “Not only are consumers getting no additional value with recent and planned price hikes, they’re, arguably, getting less value.”
Still, with the overall television business contracting because of the rising cost of production and a soft ad market, Netflix may find itself in a strong competitive position. For instance, the original series “One Piece,” an adaptation of a best-selling manga series, was a success in the United States and Japan. And the service found another hit in “Suits,” which originally aired on the USA Network before ending four years ago.
“We may have increased opportunities to license more hit titles to complement our original programming,” the company said in a letter to shareholders. It is a practice that benefits “our members, as well as rights holders,” the company said, referring to “the new life that success on Netflix can drive.”
Netflix said it expected net income to decline in the fourth quarter because of an increase in marketing costs associated with more movies and series being released, including the final season of “The Crown” and Zack Snyder’s big-budget sci-fi fantasy “Rebel Moon.”
Netflix said its ad-tier memberships were up almost 70 percent. In addition, it said 30 percent of its new subscriptions in the 12 countries where the ad tier was available were for the less expensive option. It also said it was having success with its efforts to combat password sharing.
The company recently initiated cuts to its animation department and shut down two animation films in preproduction, according to a Variety report. Now it is clear why: The company announced on Wednesday that it had a multiyear agreement with Skydance Animation, currently being run by the former Pixar chief John Lasseter. Skydance, formerly at Apple, will now develop and produce animated movies directly for Netflix, beginning in 2024.