Netflix is set to release its second-quarter earnings on Wednesday, marking the beginning of a series of reports from entertainment companies that have come under fire from striking Hollywood actors and writers. Experts are optimistic about Netflix’s performance, citing minimal resistance to the company’s crackdown on password sharing and the success of its new advertising tier launched in November. Despite increased competition, Netflix has managed to maintain low subscriber churn. Industry veteran Barry Diller believes that Netflix is the clear winner in this scenario, highlighting its strong business model compared to its competitors.
While other entertainment giants like Comcast, Warner Bros. Discovery, Paramount Global, and Disney will also report earnings in the coming weeks, Netflix faces particularly complex optics due to its involvement in the strike. Writers, in particular, have voiced concerns over the streaming era’s impact on their working conditions and compensation. The company has also faced backlash from shareholders who rejected lucrative pay packages for top executives last month. An impressive earnings report from Netflix could further provoke those on the picket lines. Bank of America analyst Jessica Reif Ehrlich anticipates scrutiny from guilds, emphasizing the potential use of any statements against the company. Despite these challenges, Netflix has secured licensing deals for original HBO shows from WarnerMedia, demonstrating some positive outcomes resulting from the strike.
On Wednesday, Netflix announced the removal of its $9.99 advertising-free “Basic” plan in the United States and Britain. While existing subscribers can retain their current plan, new subscribers must choose between the ad-supported plan priced at $6.99 or two ad-free options costing either $15.49 for the “Standard” plan or $19.99 for the “Premium” plan. Unlike traditional entertainment companies, which have experienced drops in stock prices since the writers’ strike commenced in May, Netflix has seen its shares rise by approximately 39%, closing at $474.80 on Tuesday.
Apart from the positive returns generated by Netflix’s new subscriber programs, the company is expected to benefit from reduced operational costs resulting from production shutdowns during the strike. Notable shows such as “Big Mouth,” “Cobra Kai,” and “Stranger Things” were originally scheduled for production but had to be halted. The creators of “Stranger Things,” Matt and Ross Duffer, revealed on Twitter in early May that they decided to stop filming because they couldn’t continue writing while on set, emphasizing that the writing process doesn’t halt during the production phase. This shift in production dynamics could contribute to cost savings for Netflix.
In summary, Netflix’s upcoming earnings report is anticipated to bring positive news, showcasing the company’s success in various areas despite the challenges posed by the strike.
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