Netflix Subscribers Surge; K-Content Also Plays a Part 

Extraordinary Attorney Woo (2022) provided by Netflix

Netflix, the world's largest online video service (OTT), has attracted nearly 6 million new subscribers worldwide in the second quarter (April to June). This is credited to the policy of banning account sharing and the introduction of an 'ad-supported plan' that offers lower monthly subscription fees in exchange for viewing advertisements. 

Currently, actors and writers in Hollywood, USA, are on a general strike, demanding fair contract practices from OTT companies like Netflix. However, Netflix is expected to remain relatively unaffected in terms of performance due to the high popularity of content produced outside the US, including in South Korea.

On the 19th (local time), Netflix announced that its second quarter revenue was $8.187 billion (approximately KRW 10.37 trillion) and operating profit was $1.827 billion (approximately KRW 2.31 trillion). This represents a year-on-year increase of 2.7% and 15.8% respectively. However, revenue fell short of the market expectation of $8.3 billion, as calculated by financial information company Refinitiv.

However, the number of subscribers, which was highly anticipated, showed a significant increase. Globally, 5.89 million people newly joined, of which approximately 1.2 million were from the United States and Canada. This marks the highest increase since 2021. Netflix introduced a policy in May this year that disallows people living in different households in the U.S. and 100 other countries from sharing accounts. The surge in Q2 subscribers is attributed to this policy which has led to an increase in new memberships due to the inability to share accounts.

Netflix also projected continued revenue growth in the second half of the year. For this, it has discontinued the cheapest ad-free plan of $9.99 per month in the United States and elsewhere. This is a strategy to encourage selection of either the $6.99 plan that requires ad viewing, or a more expensive $15.49 plan without ads.

Netflix expects close to 6 million new subscribers for the next quarter as well. Despite the expectation of inevitable damage to content producers due to the writer's strike that started in May and the actors' strike this month, Netflix has not been significantly affected.

Tech industry observers believe that Netflix is somewhat insulated from the impact of the strikes compared to other OTT companies. As one of the first to start an OTT service, Netflix has a large amount of existing content, and a relatively high proportion of its content is produced outside of the U.S. Even if production stops in the U.S., it can continue to procure new content from other countries.

Netflix owes much to South Korea in particular. The South Korean drama 'Extraordinary Attorney Woo' was the key to turning the tide for Netflix subscriber growth in the third quarter of last year. In a letter to shareholders released today, the South Korean variety show 'Physical: 100' was mentioned as one of the factors contributing to the increase in Q2 subscribers. The Wall Street Journal (WSJ) stated, "The current strike will, in the short term, reduce costs by halting content production for producers including Netflix."