Netflix earnings: Q3, 2022 - Can US demand share rebound finally stem subscriber bleeding?

19 October, 2022

Despite its prodigious spending and market lead in supply, Netflix is in second place behind HBO Max in on-platform movie demand share with US audiences, the latest data from Parrot Analytics has found.

As the free spending, sub-growth-at-all-costs era of the entertainment industry shifts back towards a focus on revenue and profits, this data points to inefficiencies in Netflix’s business model, as streamers and media giants fall under increased scrutiny from Wall Street.

In TV, Netflix hit a record low in global streaming originals demand share for the tenth consecutive quarter, sitting at 40.9% in Q3 2022. However, its rate of decline slowed down significantly thanks to record breaking audience demand for Stranger Things.

All that said, US audiences gave Netflix one reason for optimism this quarter. The streamer’s TV originals demand share grew in the United States for the first time since Q1 2021, up to 41.5% from 40.5% last quarter. 

This could help spark a much needed rebound for Netflix in the industry’s most valuable region. Demand for original content is a key leading indicator of subscriber growth, and Netflix lost roughly 1.9M subscribers in UCAN during the first half of 2022. 

The company has forecast a gain of one million global subscribers in Q3 2022, while revealing long awaited plans for new revenue streams such as its AVOD tier, and slowly growing theatrical windows.

On-Platform Movie Demand Share - United States, Q3 2022

  • As movies become more integral to the strategies and success of streamers and cross platform entertainment conglomerates, it is crucial to measure the state of play with this type of content, along with TV series. 
  • This is Parrot Analytics’ first ever look at the total on-platform demand share for movies available on the major streamers, which reveals a highly competitive market with four different streamers over 10% share. 
  • Netflix (15.3%) is in a comfortable second place behind HBO Max (18.7%) when it comes to demand for all movies available on its platform. 
  • This demand data measures all movies available on each major platform — originals, licensed exclusives, and licensed non-exclusives. Total on-platform share charts serve as a valuable proxy of which platform can become a consumer’s default home for a certain type of content.

United States Movie Demand & Supply — Q3 2022

  • This chart helps demonstrate which streamers are getting the highest ROI for their overall movie efforts — both original productions and licensed content.
  • Despite having the highest supply share (16.5%), Netflix’s demand share for on-platform movies underperforms at 15.3%. Given the resources that Netflix invests in blockbusters and awards campaigns for its smaller budget movies, they should expect higher consumer demand for their movie slate.
  • HBO Max, on the other hand, has the third highest supply share (12.5%) and the largest demand share (18.7%). This over-performance could be one result of former WarnerMedia CEO Jason Kilar’s ‘Project Popcorn.’ This controversial initiative delivered Warner Bros’ 2021 film slate to HBO Max US subscribers the same day they were released in theaters, effectively conditioning US consumers to seek out HBO Max for new movies.
  • Disney+ has leveraged a relatively small amount of movies into the third most in-demand slate. Disney+ accounts for just 4.3% of the movie supply share, but 11.5% of the movie demand share, the biggest over-performance of the major streamers. This is a testament to the power of Pixar, Marvel and Star Wars at driving audiences and consumer demand, regardless of theatricality. 

Global Originals Demand Share — Q1 2020-Q3 2022

  • Netflix’s six main competitors in the streaming originals space have a combined demand share (42.8%) that is higher than Netflix’s (40.9%). One year ago, Netflix led those streamers 45.8% to 40.2%, and in Q3 2020 Netflix had a lead of 53.5% to 32.3%.
  • Netflix’s 0.4% drop in demand share in Q3 2022 was a major improvement from Q2 2022, when its global share fell a full four percentage points.
  • This small decline can be attributed to the success of the fourth season of Stranger Things. The blockbuster series peaked at 260.5x more in-demand than the average show worldwide, and was the number one show worldwide across all platforms for three straight months. This was by far the highest peak demand Parrot has measured for a streaming original series, and was second only to the final season of Game of Thrones for overall peak global demand (353.8x).

United States Originals Demand Share — Q3 2022

  • Blockbuster originals in Q3 2022 helped many major streamers, including Netflix, further solidify their positions with US audiences. 
  • Just as it did globally, Stranger Things hit record peak demand for a streaming original with US audiences, topping out at 259.6x more in-demand than the average show in the US. Ryan Murphy’s Dahmer — Monster ended the quarter on a high note and will help build momentum into Q4 2022.
  • These hit shows were enough to help Netflix bounce back and actually gain US demand share for the first time since Q1 2021 — a strong leading indicator that Netflix may be able to slow down or even turn around its UCAN subscriber losses as soon as this quarter.
  • Amazon Prime Video (9.1% to 9.3%) cemented its hold on second place in this category off the back of The Boys and Lord of the Rings: The Rings of Power
  • Both Disney streamers gained US market share in Q3 2022. Hulu grew from 7.1% to 7.4% following new seasons of hits originals such as Only Murders in the Building, The Orville, and The Handmaid’s Tale. She-Hulk: Attorney at Law proved that MCU TV series still draw exceptional demand and loyal audiences, giving Disney+ a modest gain from 8.4% to 8.5%.

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