Netflix shares surged more than 12% when the company revealed its earnings. An increase in sign-ups was attributed to their recent efforts to thwart password-sharing and the introduction of an ad-supported option. Prices for their basic and premium plans were also raised in the U.S.
Netflix shares surged in after-hours trading Wednesday following the company's report of a significant bump in subscriber growth. This increase was attributed to measures taken to crack down on password sharing, as well as the new ad-supported tier. 8.76 million global subscribers joined in the third quarter, surpassing the 5.49 million that analysts had projected. This is the highest net add total for Netflix since the quarter spanning April through June of 2020, when Covid-related restrictions kept people home. Revenue and earnings met expectations at $8.54 billion and $3.73 per share respectively. A total of 247.15 million memberships were reported, surpassing the 243.88 million expected by Street Account. Almost 70% of its base is subscribed to the ad plan, however a specific percentage was not disclosed. The company is planning to raise price points for its basic and premium packages, leaving the standard plan unchanged. Prices for the ad plan will remain at $6.99 for the U.S. market. In order to boost profitability, Netflix has to address higher production costs. It recently made a deal with Hollywood writers to pay higher wages and base monetary benefits on streaming popularity. Negotiations with striking actors, however, have been stalled for about a week. For 2024, the company plans to make "substantial changes" to its executive compensation model, but performance-based rewards will still be employed. Co-CEO Ted Sarandos and former co-CEO Reed Hastings each earned over $50 million in 2022. For the remainder of the year, Netflix expects revenue to hit $8.69 billion, which is below Wall Street expectations. Furthermore, operating margins for 2023 and 2024 are expected to be 20% and 22-23% respectively. Comcast, the parent company of NBCUniversal, is a part of the Alliance of Motion Picture and Television Producers.
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