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Netflix says it gained 2.4M subscribers in the 3rd quarter, more than doubling expectations

The company had reported losing subscribers in the first two quarters of the year, the first subscriber losses in its history.
Netflix's Los Angeles headquarters
Netflix's Los Angeles headquarters.Mario Tama / Getty Images

Netflix added 2.4 million new subscribers in its most recent quarter, topping expectations that it would add 1 million. The addition was seen as a reassuring sign for investors and similar platforms that consumer interest in video streaming remains healthy.

The company had reported losing subscribers in the first two quarters of the year, the first subscriber losses in its history, though in the most recent quarter it reported a lower loss than what was originally forecast.

But the company said Tuesday that it continues to be profitable on an annual basis compared with its competitors, whose losses it estimated at "well over $10 billion." It also said it commands 7.6% of TV time, which it estimated as 2.6-times more than Amazon and 1.4-times more than Disney and Hulu.

"After a challenging first half, we believe we’re on a path to reaccelerate growth," the company said in its earnings release Tuesday. "The key is pleasing members. It’s why we’ve always focused on winning the competition for viewing every day. When our series and movies excite our members, they tell their friends, and then more people watch, join and stay with us."

The company said it added the most subscribers in its Asia and Pacific region, with 1.4 million new paid memberships, compared with 100,000 in the U.S. and Canada.

Netflix is coming off a quarter that saw the true-crime story "Monster: The Jeffrey Dahmer Story" rack up some 701 million hours viewed, making it the platform's second-biggest series ever after "Stranger Things" and ahead of the period drama "Bridgerton." But it also saw the controversial Marilyn Monroe biopic "Blonde" fall short in its debut, despite a heavy promotional push.

The Wall Street Journal reported that the company's internal metrics had begun showing users coming to the platform less often. That prompted co-chief executive Reed Hastings to push his staff to improve visit frequency, the paper said.

In a bid to boost its user growth, the company announced last week a new $6.99 a month ad-supported streaming tier would launch in November. In a note criticizing the company ahead of Tuesday's earnings report, analysts at the Lightshed Partners research firm called Netflix's approach to winning ad dollars "primitive" and said the company should clarify whether it is trying to compete with traditional broadcast television, as opposed to digital ad revenue giants Google and Facebook.

In a separate note released last week, UBS analysts noted it would take some time for the new ad-supported tier to scale. It said the fact that only one user at a time will be able to stream content could ultimately limit the plan's attractiveness compared with Netflix's most popular, $15.49 a month standard package, which supports two users streaming at the same time.

Wedbush Securities analyst Michael Pachter expressed a more favorable view of the new ad tier, writing in a note last week that it would likely limit the number of cancellations the company sees. According to a Wedbush survey of Netflix users, he said, people most likely to opt into the ad-supported tier are those who would have otherwise quit the platform. 

Netflix shares have gained more than 8% since announcing the new plan last Thursday.

Netflix has also foreshadowed a crackdown on password sharing, with plans to launch a paid family offering next year. Netflix estimates 100 million households worldwide are using shared passwords — 30 million of them in North America. The company has said the unauthorized sharing makes it harder to grow and maintain subscriber levels. On Monday, it introduced a “Profile Transfer” feature designed to let users who may be sharing a subscription opt into new a Netflix membership. 

Company shares are down 60% year to date amid a broader decline in tech stocks.