Why did Netflix earn the most money in the third quarter?
$Netflix(NFLX.US$ After two quarters of failure, the company experienced strong results in the third quarter and resumed growth, surpassing consensus on subscribers, revenue, and profit, surging nearly 14% after the market. Furthermore, the advertising business is progressing faster than expected.
Why is Netflix, Inc. Q3's performance rising so much?
The most important indicator of Netflix, Inc.'s stock price is neither revenue nor profit, but the number of subscribers.
The most important indicator of Netflix, Inc.'s stock price is neither revenue nor profit, but the number of subscribers.
Net subscribers increased by 2.41 million in the third quarter, higher than the market consensus of 1.03 million.
In terms of geographical location, North America increased by 104K, while the consensus was -271K; EMEA (Europe, Middle East and Africa) increased 568K, while the consensus was 12K; Latin America's 312K vs market consensus was 221k; while the Asia-Pacific region increased by 1.43 million to 1.26 million.
This is the first time since this year that North America has achieved net positive growth. Several hit dramas “Monsters: The Jeffrey Dahmer Story”, “Stranger Things S4”, and “The Grey Man” contributed greatly. The interesting thing is,These horror element shows suit the tastes of North American and European audiences. As a result, the total number of users in North America and Europe was nearly 900K more than expected by the market.
The Asia Pacific region has also adopted a localization strategy.Examples include South Korea's “Extraordinary Lawyer Woo Young-hyun” and India's Delhi Crime. The Asia Pacific region has become the fastest-growing region for Netflix, Inc. subscribers.
butmonetizationIt also counts.
Netflix, Inc.'s revenue for the quarter was US$7.93 billion, up 5.9% year-on-year, beating the market consensus of US$7.85 billion, due to a 5% increase in average paid membership and ARPU.
Among them, due to rising prices in North America, ARPU increased 12% year on year to 16.37 US dollars; Latin America rose 9% year on year, up 16% in local currency; Asia Pacific region - 13% year on year, or -3% in local currency; and EMEA region was -7% year over year, 7% in local currency.
Currency has had a big impact on Netflix, Inc.'s performance.EMEA's growth was entirely depreciated by & associated depreciation.
The decline in the Asia-Pacific region is mainly due toIndia's higher growth rate provides lower pricesAs Netflix, Inc. cooperates more closely with Bollywood, the Indian market continues to grow at an attractive rate.
Why is Netflix, Inc. speeding up its advertising business?
Netflix, Inc. announced the launch of a new “basic package” with ads in the US and 11 other markets a week before the earnings report was released. Management is more confident that this won't have much impact on existing package users.
Netflix, Inc. announced the launch of a new “basic package” with ads in the US and 11 other markets a week before the earnings report was released. Management is more confident that this won't have much impact on existing package users.
Last week, it was reported that hundreds of advertisers have joined Netflix, Inc. and almost ran out of ad space in the early stages. ThisIt shows that there is a strong demand for Netflix, Inc. ads in the market.Netflix, Inc. partner $Microsoft(MSFT.US$ They may also be the beneficiaries of this collaboration.
Currently, Netflix, Inc. has not disclosed more information on ad pricing, but it is certain thatNetflix, Inc.'s entry into the advertising business had the biggest impact on traditional CableNet. $Comcast(CMCSA.US$ $AT&T(T.US$ $Disney(DIS.US$
We believe advertising will be the second growth curve for Netflix, Inc. while also creating synergies with existing subscription plans. and a shared account to further resolve the issue。
Netflix, Inc. wants to find a balance between shared accounts. Providing a low-cost software package for price-sensitive users while adding some advertising business, on the other hand, they don't want to affect the original users.
Netflix, Inc. wants to find a balance between shared accounts. Providing a low-cost software package for price-sensitive users while adding some advertising business, on the other hand, they don't want to affect the original users.
As for payments, there are two options, “separate payment” or “main account payment”.
3. What challenges will Netflix, Inc. face in the future?
As for the Q4 performance guidelines, Netflix, Inc. is both confident and conservative.
The company expects 4.5 million new users, exceeding the market consensus of 3.93 million, but the revenue guidance is 7.8 billion US dollars, which is lower than the market forecast of 8 billion US dollars. Two reasons,One is a currency headwind, and the other is a new subscription package with lower prices。
The company said it will stop predicting growth in paying users, which means investors should focus on cash monetization rather than user growth. This will change the valuation metrics.
APRU was used as an important indicator and will be replaced by some advertising revenue in the future. Since advertising revenue pricing methods are unclear and profit margins vary, it is difficult to estimate the synergy with existing businesses.Therefore, we are currently in a valuation vacuum, and the range price of stocks will be large.
There are two issues worth paying attention to now:
1. Stability in high ARPU regions (North America, Europe, Japan and South Korea).
2. Meet the user's content preferences. (Competing with Disney+, etc.)
This is probably also an important reason why the Netflix, Inc. earnings report emphasizes that the time spent watching movies this quarter was longer than Prime and Disney+.
Market share of the viewing time of 2 or more users in August
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