Netflix has released its second-quarter earnings, beating expectations on earnings per share, but missing on revenue. The streaming giant lost about 970,000 subscribers, less than the two million subscriber loss that had been predicted. Kristin Myers, the editor-in-chief of TheBalance.com, joined Cheddar to explain why Netflix shares are still up despite the loss.  "They reported that most of their subscriber loss was in the United States, but they were able to buoy 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," she said, noting that breaking up the recent season of the show changed up its standard bingeing format to some success.

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Netflix Pops Despite Nearly One Million Subscribers Lost

here 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 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 onto sub 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. And 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.