Netflix reported better-than-expected results late on Tuesday.
What does this mean?
Netflix’s last quarterly update saw it post its first fall in paid users in over a decade. And while it admitted back then that it was expecting to lose another 2 million subscribers last quarter, there were hopes that the latest season of Stranger Things would help stem the bleeding. Turns out it did: the company lost just 970,000 subscribers over the last quarter. That smaller drop – paired with higher membership prices – helped drive up profit by a better-than-expected 7% last quarter versus the same time last year. And that’s despite the $339 million loss Netflix suffered with the strong dollar hitting its international takings. So sure, it did give a worse-than-expected subscriber growth outlook for this quarter, but investors were probably just glad last quarter wasn’t the trainwreck it might’ve been: they sent Netflix’s stock up 8% after the news.
Why should I care?
Zooming in: A mud-against-a-wall approach.
Netflix’s non-existent subscriber growth means it’s more important than ever for the streaming giant to make the most of its existing customers. So it's been trying to do just that in a few different ways. First, it’s been rolling out extra charges for some of the 100 million accounts that share accounts with other households. Second, it’s been drip-feeding shows to viewers over the course of a few months, in a bid to hang onto subscribers who may otherwise have binged and canceled in one go. And third, it’s reportedly been thinking about selling its older TV shows to networks around the world and putting its movies in theaters to make extra income.
The bigger picture: Now for a word from our sponsors…
Netflix is planning to roll out a new cheaper, ad-supported offering later this year too, and it announced last week that it was partnering with Microsoft for the tech and sales expertise it needs to build it out. This is a delicate balance to strike, mind you: the company has to reach enough eyeballs to attract advertisers, while making sure not to drain away too many full-price customers.
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Hasbro Has Adults And Kids To Thank For A Strong Earnings Update
Hasbro – the biggest toymaker in the US – posted better-than-expected quarterly earnings on Tuesday.
What does this mean?
Hasbro knows its audience: the company released an expansion set of its popular trading card game “Magic: The Gathering” last quarter, boosting orders for both tabletop and online versions of the game. That helped the company’s Wizards of the Coast segment – which also includes Dungeons & Dragons – grow operating profit by 17% last quarter from the same time last year. The low production costs of those games – along with higher prices for toys like Nerf Blasters and My Little Pony – helped give overall profitability a lift too. So while the strong US dollar meant Hasbro’s international profits were worth less when converted back, its net profit still grew by a better-than-expected 10%.
Source: The Wall Street Journal, FactSet
Why should I care?
The bigger picture: Growing up is optional.
You’d be forgiven for thinking those booming toys sales were all the result of enthusiastic kids, but nope: adults have played a big part in helping US toy sales surge over the past few years, according to data tracker NPD Group, while a separate survey has shown that 58% of adult respondents buy toys and games for themselves. That might be why toymakers have started to market new products just to adults, with Lego devoting whole ranges to adult builders and Basic Fun! – the company behind Care Bears – planning to launch Lite-Brites for real people with jobs and mortgages in September.
Zooming out: Culture is dead.
Toymaker Mattel is going another direction altogether: it’s pursuing a broader strategy of moving from manufacturing company to intellectual property company. It’s been touting the upcoming Barbie movie as a “cultural event”, and it has a host of other projects in the pipeline, including a Magic 8 Ball movie you never knew you didn’t want.
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