Netflix increased subscription prices for some streaming plans in the United States, Britain, and France on Wednesday as it shattered expectations for new customers, sending its shares surging 13%. The company picked up almost 9 million subscribers around the globe in the third quarter, beating Wall Street analysts’ forecast for 6 million. The substantial customer gains were the best quarterly increase since early 2020, when the coronavirus pandemic turned Netflix into a gold mine for households tethered to home but still searching for entertainment.
The subscriber growth also reflects the strength of Netflix’s original programming, which accounts for more than a third of its library and has proven to be a powerful driver of the company’s recent expansion into advertising. And it was a reminder that the company has maintained momentum even amid the ongoing Hollywood actor’s strikes and stifling labor tensions in the global entertainment industry.
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In the third quarter, Netflix’s total paid membership jumped to 247.2 million from 234.2 million at the end of last year. The subscriber growth easily exceeded analyst estimates, and the Los Gatos, California-based company expected similar additions in the current quarter.
Earlier this month, the Wall Street Journal reported that Netflix would raise prices a few months after the continuing Hollywood actor’s strike ends. That appears unlikely now as the Writers Guild of America recently ended its walkout and agreed to a deal with services like Netflix that provides streaming data, higher minimum wages, and better residuals.
Investors were also encouraged by a survey by market research firm CivicScience, which found that the number of Netflix users who plan to quit the service over a $5 monthly price hike is small and concentrated among those who watch an hour or less of TV per week. Those users could easily be converted to ad-free subscribers, and churn rates should be acceptable for the company, which is far from saturated with consumers in the United States.
While the subscriber numbers and earnings results were encouraging, Netflix faces rising competition in the United States from Walt Disney and Warner Bros Discovery, which have invested heavily in their streaming offerings. Some local governments, including Pasadena, California, have been considering whether to tax video-streaming services such as Netflix and Hulu using existing municipal utility taxes designed for cable television. That could add to Netflix’s cost of doing business and slow its growth. Nonetheless, the third-quarter results were a welcome sign that the company’s latest moves to crack down on password sharing and increase pricing are working. The company’s share price was up 12% in after-hours trading.