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　　"Thanks to God, we finally got out of the quarterly decline."

　　At the third-quarter earnings report, Netflix co-CEO Reed Hastings was overjoyed: "We're back on a positive track."

　　On October 18, local time, Netflix released its financial report for the third quarter of 2022. The company's revenue in the third quarter reached US$7.92 billion, a slight decrease from the second quarter, but higher than the market 's expected US$7.85 billion; profit was US$1.4 billion, down 3% year-on-year, and the US stock profit was US$3.1, but higher than the market's expected US$2.13 .

　　At the same time, Netflix finally ushered in the good news of the increase in the number of subscribers: the total number of Netflix subscribers increased by 2.41 million in the third quarter, and the total number of global subscribers reached 223 million.

　　The overall performance exceeded expectations, which is invaluable for Netflix in 2022. Netflix lost 200,000 and 970,000 subscribers in the first and second quarters of this year, the company's first decline since 2011. Negative news such as layoffs and content cost cuts followed. Netflix’s performance in the capital market has also plummeted: from the beginning of the year to the close of the U.S. stock market on Tuesday, Netflix’s stock price has fallen by 60%.

　　After the earnings report was released, on October 19, Netflix US stocks rose nearly 13% before the market.

　　Behind the increase in the number of subscribers is Netflix's lineup of works in the third quarter. In the past three months, Netflix has launched the fourth season of the popular American series "Stranger Things", with a total viewing time of 1.35 billion hours, making it the most watched English-language series on Netflix ever. The hit Korean drama "Very Lawyer Yu Young-min" topped the list of non-English-language dramas in 28 countries, with a total of 402 million hours watched in 28 days.

　　However, it is not only the number of subscribers and the film list in the third quarter that have attracted attention. Netflix's upcoming "low-cost subscription plan with ads" is the focus of the audience. The total duration of the third-quarter earnings report was 42 minutes, and executives spent nearly 15 minutes answering questions about advertising revenue.

　　During the new crown epidemic, Netflix ushered in a period of rapid user growth. However, after streaming media has gained a foothold in the North American market and international market, the number of streaming media users has also hit the ceiling. Companies must find new ways to increase revenue, and advertising is one of those.

　　As early as the first quarter of 2022, Netflix signaled the launch of an ad-supported subscription plan. The plan came to fruition quickly. In July, Netflix identified Microsoft as an ad server. In September, Netflix told advertisers that its low-cost subscription plan with ads would reach 40 million subscribers in 2023.

　　Netflix's use of advertising as a new way to boost performance has raised eyebrows from investors. According to The Hollywood Reporter, JPMorgan Chase said in a research report released on October 10 that advertising is critical for Netflix to re-accelerate and increase revenue, and the new subscription plan can increase the size of Netflix’s serviceable market.

　　But there is no lack of doubts about the advertising plan in the market. Investment agency MoffettNathanson pointed out in the research report that whether the advertising solutions provided by Microsoft can help Netflix survive the poor business performance is the key to the advertising model. In addition, the research report also pointed out that users may "consumption downgrade": abandon high-priced subscription plans and switch to low-priced subscription plans.

　　On October 14, Netflix officially announced that it will launch the "Basic with Ads" program. Users who choose this subscription plan will need to watch 5 minutes of ads every hour. Other subscription plans remain ad-free.

　　Netflix said in its shareholder letter that the "Basic plan with ads" will reduce the price of the existing minimum subscription plan by 20% to 40%. For example, in the U.S. market where pricing has been announced, the "Basic plan with ads" is priced at $6.99/month, and existing subscription plans are priced at $9.99/month (Basic), $15.49/month (Standard), and $19.99/month, respectively. Month (Premium).

　　From November 2 to November 10, the "Basic Plan" will be launched in 12 countries including Canada, Mexico, Australia, Brazil, France, Germany, Italy, Japan, South Korea, the United Kingdom, the United States and Spain. Competitor Disney+'s same "low-cost subscription plan with ads" is expected to launch in December, giving Netflix a month ahead.

　　Netflix executives are bullish on the prospects for ad revenue. On the consumer side, the company's COO and chief product officer, Greg Peters, believes that the "Basic plan with ads" is not priced very high and is expected to attract a large number of new users to subscribe to Netflix. He also emphasized that most of the original Netflix users will maintain the original high-priced subscription plan, because Netflix users rarely downgrade their subscription plans.

　　At the same time, in Netflix's view, advertisers have also shown enthusiasm for advertising. When the "Basic Plan with Ads" was released on the 13th, Netflix said that the company had almost sold out its advertising space and that hundreds of advertisers had signed up.

　　However, the observed demand does not represent the maturity of the advertising model. According to Netflix 's shareholder letter, the company does not expect the "basic plan with ads" to have a significant impact on its fourth-quarter financial performance. Netflix executives said in the earnings call that the exploration of advertising revenue is still in the early stages.

　　Netflix executives speculate that the low-cost subscription plan with ads will help Netflix reduce user churn, but the core method of reducing user churn is still to "please users" through works.

　　Netflix expects fourth-quarter revenue to fall to $7.8 billion and 4.5 million new subscribers due to the strong dollar. Starting next quarter, Netflix will no longer forecast subscriber growth numbers, and the focus will shift to revenue numbers.