Netflix 2022 Q2 Report Beats Expectations: What Can SaaS Vendors Learn from This?

Credit: Tumisu

Netflix released its second-quarter results on Tuesday and surprised everyone with the outcome. After anticipating a subscriber loss of 2 million following its first-quarter results, the streaming giant ended up losing only 970,000. This was seen as a big win for Netflix as its shares soared by as much as 8% after the results were reported. It also scooped up a quarterly profit of  $1.4 billion and a revenue increase of around 8.6%, year-over-year.

Now, analysts are singing a different tune for Netflix’s third quarter. This time around, they see the streaming leader reversing part of its losses and even projected growth of $1.8 billion. While the company lost an estimated 1.3 million subscribers in North America, it gained subscriptions from other parts of the world, a payoff from its strong original international programming.

Netflix also bared its plans to release its lower-priced ad-supported tier, in partnership with Microsoft, in early 2023—a move seen to boost profits and revenues even further. Likewise, it is testing plans to monetize the viewing experience of non-paying households, which will also be officially rolled out in 2023.

So, how did Netflix turn things around with its ad-supported tier and password-sharing plan still under development? One of the reasons is its outstanding original content. And this is probably the biggest takeaway SaaS vendors can pick up from Netflix’s strange return to form.

Building on a Platform’s Strengths

“Stranger Things” helped avert disaster as its groundbreaking fourth season amassed an astonishing 7.2 billion minutes of viewing time, which made the series the second most watched show on the platform. This launched Netflix to the stratosphere in terms of viewership. According to the latest streaming statistics, Netflix notched 1.33 trillion minutes viewed in the second quarter of 2022, dwarfing the results of TV networks like CBS (753 billion) and NBC (597 billion), and its closest streaming competitors like Disney+ (245 billion) and Amazon Prime (174 billion).

At the end of the day, content is the primary reason viewers subscribe to streaming services. And the sheer interest generated by “Stranger Things” and other popular shows like “Umbrella Academy” and “Ozark” drew subscribers to the platform, even those who previously unsubscribed.

In regard to SaaS, this is the same as building on a platform’s competencies and introducing new solutions to strengthen and expand its capabilities. As such, transformative technology like artificial intelligence and machine learning are being adopted by SaaS platforms across all major industries. This has led to the AI market having a projected value of $1.4 trillion by 2030 and the SaaS market’s expected valuation of $720.4 billion by 2028. Furthermore, new innovations can help SaaS platforms feel fresh even when in a matured and saturated market.

Adopting Smart Pricing and Monetization Schemes

Content isn’t the only factor that buoyed Netflix’s second-quarter performance. Excitement among investors was also generated when the streamer formalized the release of its ad-supported tier and password-sharing monetization scheme. After all, the ad-supported plan’s low price can trump competitors and compete with smaller players while the monetization scheme can reap earnings from over 100 million households globally who watch Netflix but do not pay for the experience.

SaaS vendors can study their target audience, their audience’s spending power, and their market’s interests to create or adjust price packages so that these conform with the needs and preferences of subscribers and potential customers. Given today’s global inflation and the population’s limited buying power, they can also create a new basic plan—akin to Netflix’s ad-supported tier—that has limited features but has enough functionalities to draw potential subscribers to the platform. This enables SaaS companies to monetize despite the relative unwillingness of people to part with their money.