with more insight on this. Kristin Myers editor in
chief of the balance dot com. Kristen, good
to see you. Thank you so much for joining
us this morning. We mentioned this 970,000 is still
a big number close to a million, but much
more than the 200,000 lost the last quarter in the
last earnings report. So why exactly are we seeing
the shares of netflix still surging? I mean we're
looking at the stock right now, it closed down
higher 5.6% in after hours trading premarket this morning.
It's still up about 4%. What do you think
investors are thinking right now? Yeah, and that's
actually coming down just a little bit slightly. I
mean when I started my commute this morning, it
was up 6% in the pre market. You know
, we always talk about good news is bad news
in in the market and it seems like bad news
is actually good news at least when it comes to
twitter because that 970,000 subscriber loss being far better than
that two million, that of course was forecast.
And then of course with netflix forecasting in the future
, at least for the second half of the year
that they will be returning to that subscriber growth in
the third quarter. I think a lot of questions
remain, however, on how they're going to do
that, some of the revenue optimization tactics that they're
going to be employing. But again, investors really
looking at this as they were expecting an absolute bloodbath
turned out it was more like a paper cut,
at least with this, nearly one million subscriber loss
. Yeah, it's interesting to talk about the comparables
though, because yesterday we were doing a ton of
interviews, we had guests on the show and we
were almost like you said, preparing for a bloodbath
with this earnings report. Do you think it's possible
that this was all a part of the strategy that
netflix purposefully tempered expectations to make that nearly one million
subscriber loss not seem as bad again in the great
scheme of things when we talk about the last earnings
report, that loss of 200,000 subscribers, if our
viewers will remember, it did move markets and even
had some of the other major streamers in sympathy trading
uh, downward trajectory, um, for much of
that week. And even after, that's a really
good point. And you actually see this happen not
just with netflix, but frankly with a lot of
companies during earner earning season, if analysts and if
investors are far more downbeat going into that quarterly report
and then it doesn't end up being as bad as
they were expecting, they were stealing themselves embracing themselves
. Absolutely for the worst. And when they get
this kind of news, it's a little bit of
a sigh of relief. It's almost like those tactics
that teenagers have, right, when they want something
from their parents, they tell everyone that the sky
is absolutely falling and when they say, oh,
I actually just failed my test. Their parents aren't
as angry with them and we're seeing a little bit
of that reaction here. If we want to stretch
that anecdote out into what we're seeing right now um
within with the investor reaction, will this rally however
, hold into today of course, remains to be
seen. As I mentioned, we are seeing some
of that pre market pop coming down just a little
bit slightly as we head right into that opening bell
. But again, we saw investors incredibly downbeat going
into this quarterly report And again, 970,000 I think
just last year if Netflix had reported that kind of
subscriber loss, we would have seen a much different
reaction. But it is much different times now that
we're in the second quarter of 2022, we have
inflation concerns, recession concerns the fact that netflix wasn't
, was able to hold on to some of those
subscribers, it wasn't as bad as that as had
been forecasted and the fact that they think that they
will actually be able to return to subscriber growth in
the third quarter I think is pretty big news.
Yeah, especially I think coming on the heels of
Stranger Things season for I think we all saw it
on social media and the reactions if you weren't viewing
it yourself. So how do you think the latest
season of that flagship series impacted viewership for the platform
and also maybe potentially this earnings report and its success
? Yeah, that is such a good question.
I think because Stranger Things really showed how netflix is
actually able to hold onto subscribers if they put out
quality content that the viewers want to see. And
not only will they able to hold on to some
subscribers, but they'll actually be able to pick up
some subscribers. They reported that most of their subscriber
loss was in the United States, but they were
able to bully some of those losses by subscriber gains
elsewhere. And I think that's in part due to
some of the content like Stranger Things, but we
also saw something very interesting with Stranger things. Netflix
trying something new. Typically netflix lets you binge watch
, right, you go on and you just hole
up in your room for two or three days and
you watch an entire season of a show that did
not happen this time around. They instead broke up
that fourth season into Part One and Part two.
And that meant that subscribers essentially had to keep logging
in. They had to keep that subscription going in
order to watch the end. And I think that
that might be something that netflix is going to start
doing more and more going forward, especially as they
try to stem any future losses and again return to
subscriber growth. Yeah, Kristen that's such a good
point and I didn't even realize it from the consumer
and audience perspective, it's exciting, but also a
little bit frustrating that a typical series season run like
we've seen in the past on traditional networks and even
on streaming platforms is broken up, especially as netflix
has kind of introduced that binging style of viewing television
and streaming. I want to pivot just a little
bit here though because there were a lot of things
also in this earnings report that we learned particularly about
Netflix unveiling its lower cost ad supported tier early next
year. This is also being delayed initially. I
think this was announced for 2022. How do you
think this is going to help boost that subscriber number
? Yeah, so what we're going to be seeing
right now is netflix is absolutely trying everything not just
to essentially keep some of those subscribers, but they
also have to return to revenue optimization. And that
tiered subscription services is going to be one of those
methods and this is not something new for some of
these streaming services. We've seen other platforms Try to
pull out advertisers for some of those lower tiers getting
rid of advertisement for some of those higher tiers.
And this might be something where people say, Okay
, I'm not willing to spend$15 a month on
Netflix, but I actually don't mind having a commercial
for some of those lower options and especially as right
now consumers are really tightening their belts, inflation is
hitting them hard. The big r word, right
, recession fears continue to brew and continue to create
. I think consumer anxiety, this might be something
that might help a lot of consumers say I'm willing
to spend 9 99 for example, for a month
and watch those commercials. It's going to be a
far cheaper option than compared to some other entertainment options
that are out there. So I'm going to stick
with netflix, especially if they continue to keep putting
out that quality content that especially some of those younger
viewers that are more likely to cut are going to
want to watch. All right, Kristin Myers,
editor in chief of the balance dot com.