Netflix added 4.4 million subscribers in the three months to September 30th – more than double the previous quarter. Revenue increased by 16 per cent.
The buoyant performance for Netflix follows a sluggish start to 2021, when the surging demand for streaming driven by the pandemic tapered off. The world’s biggest streaming platform said it now expects to add some 8.5 million new subscribers in the fourth quarter.
In a note to investors, Netflix said: “After a lighter-than-normal content slate in Q1 and Q2 due to Covid-related production delays in 2020, we are seeing the positive effects of a stronger slate in the second half of the year. In Q3, we grew revenue 16 per cent year over year to $7.5 billion (€6.45bn), while operating income rose 33 per cent vs the prior year quarter to $1.8 billion. We added 4.4 million paid net adds (vs 2.2 million in Q3 2020) to end the quarter with 214 million paid memberships. We’re very excited to finish the year with what we expect to be our strongest Q4 content offering yet, which shows up as bigger content expense and lower operating margins sequentially.”
Revenue growth in Q3 was driven by a 9 per cent and 7 per cent increase in average paid streaming memberships and ARM, respectively.
Netflix continued: “We under-forecasted paid net adds for the quarter (4.4 million actual vs our 3.5 million projection), while ending paid memberships of 214 million was within 0.4 pe cent of our forecast. For the second consecutive quarter, the APAC region was our largest contributor to membership growth with 2.2 million paid net adds (half of total paid net adds) as we are continuing to improve our service in this region. In EMEA, paid net adds of 1.8 million improved sequentially vs the 188k in Q2 as several titles had a particularly strong impact. The UCAN and LATAM regions grew paid memberships more slowly. These regions have higher penetration of broadband homes although we believe we still have ample runway for growth as we continue to improve our service.”
In terms of content, Netflix pointed to season five of La Casa de Papel (aka Money Heist) and season three of Sex Education as two of its biggest returning shows in the quarter with 69 million and 55 million member households, respectively, choosing to watch these titles in the first four weeks. On the heels of The Queen’s Gambit, Netflix also had another limited series hit with Maid which launched just after quarter-end on October 1st. Netflix expects this story about living on the poverty line by playwright and screenwriter Molly Smith Metzler to reach 67 million households during its first four weeks.
Netflix also bigged up the success of Squid Game, a Korean drama series released on September 17th, saying: “[…] it has become our biggest TV show ever. A mind-boggling 142 million member households globally have chosen to watch the title in its first four weeks. The breadth of Squid Game’s popularity is truly amazing; this show has been ranked as our #1 programme in 94 countries (including the US). Like some of our other big hits, Squid Game has also pierced the cultural zeitgeist, spawning a Saturday Night Live skit and memes/clips on TikTok with more than 42 billion views.”
Netflix added that demand for consumer products to celebrate the fandom for Squid Game is high and those items are on their way to retail very soon.
Commenting on its film slate, Netflix said: “[it] also continues to build with a variety of successful Q3 titles such as action film Sweet Girl starring Jason Momoa (68 million member households chose to watch in the first four weeks), Kissing Booth 3 (59 million), the last installment in the romcom trilogy, the animated family film Vivo (46 million) and Blood Red Sky, a German-language action horror movie (53 million).”
On the subject of viewing figures, Netflix confirmed that “Later in the year, we will shift to reporting on hours viewed for our titles rather than the number of accounts that choose to watch them. There is some difference in rankings […] but we think engagement as measured by hours viewed is a slightly better indicator of the overall success of our titles and member satisfaction. It also matches how outside services measure TV viewing and gives proper credit to rewatching. In addition, we will start to release title metrics more regularly outside of our earnings report so our members and the industry can better measure success in the streaming world.