Netflix (NASDAQ: NFLX) reported that it lost roughly one million subscribers in the second quarter of 2022, and, believe it or not, that's good news. After reporting a dip in subscribers for the first time in April, Netflix had estimated that it would lose two million subscribers during Q2.
"We are talking about losing one million instead of losing two million, so our excitement is tempered by less bad results," Netflix Co-Founder and Co-CEO Reed Hastings said on an investor call.
Despite the loss, Netflix reported a $1.44 billion net profit, and the company also said in the July 19 report that it thinks its subscriber loss is slowing. In fact, the platform reportedly expects to see a one million subscriber gain in Q3.
Since its 1997 beginnings as a movie rental service, Netflix has come to dominate the streaming market- at least, until recently. Netflix's outlook started to turn sour after it reported a 200,000 loss in subscribers in its Q1 for this year. Prior to that report, Netflix hadn't reported a loss in subscribers in a decade.
Following the Q1 report, the streaming giant's stock dropped 37% in a single day. In 2022, Netflix has carried out several rounds of layoffs and cancellations and has lost more than $200 billion in market value. However, the fact that the Q2 report was better than expected may suggest that Netflix has started to address the mistakes that lead up to its Q1 loss.
Along with cutting back, Netflix has also been introducing new services and projects in an effort to find new revenue sources. Recently, the company announced that it will be partnering with Microsoft (NASDAQ: MSFT) to design an ad-supported member-tier that will be available at a lower price than regular subscriptions. That service is expected to see limited release in early 2023.
After the first-quarter fallout, Netflix also pointed to password sharing as a culprit behind their loss in subscribers. The platform claims that 100 million households access Netflix for free thanks to password sharing.
To address the issue, Netflix is now running tests in Latin America on two methods for cutting down on password sharing. One method allows subscribers to "add a member" to their account, and the other charges $2.99 per month to "add a household".
Netflix has also been increasingly focused on its own original content and building up a library of quality shows. Currently, six-in-ten Netflix tv and film projects are produced in-house.
Although, that doesn't mean the company plans on spending more on content: Netflix's chief financial officer said that the platform won't be increasing its $17 billion yearly content budget for the coming years.
Even with the loss in subscribers, Netflix is still the largest streaming service.