Preview - Ahead of its Q3 earnings release, Netflix faces questions about user engagement

Reuters, October 19 - As competition intensifies and signs of weakening user engagement emerge, investors in Netflix (NFLX.O) are waiting for the company to detail its plans to sustain growth when the streaming giant reports its third-quarter earnings on Tuesday.

Netflix Co-CEO Ted Sarandos recently admitted that the company's "growth has not met expectations," stating that live programming may become an opportunity to accelerate growth.

The streaming company is facing a fundamental shift in the entertainment industry landscape, as lower-cost, creator-led video content is eating into the market share of premium series. According to Nielsen (link) data, YouTube, the dominant streaming platform in the U.S., now boasts almost twice the viewing hours of Netflix and continues to grow its market share.

Here are more details:

• According to data compiled by London Stock Exchange Group (LSEG), Netflix's revenue growth in the third quarter is expected to reach the lowest level in three years, with sales projected to rise 11.8% to $12.87 billion.

• The company has cut about 6% (link) of its staff; analyst Ross Benes at Emarketer says this move reflects the streaming industry's shift toward profitability.

• Netflix has also seen changes in its content leadership (link): longtime content chief Bela Bajaria has left, and former Disney executive Peter Rice is taking over the position.

• According to market research firm Apptopia, in the third quarter U.S. user churn rate year-on-year increased by 16.6%, about double the growth rate of the previous three quarters, while downloads in the U.S. and Canada fell by 20%.

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• Jefferies estimates that average monthly viewing time per Netflix member declined from 66 hours in the first half of 2023 to 49 hours in the first half of this year.

• Analysts say that the 2026 FIFA World Cup and a weaker content slate compared to last year have both weighed on Netflix's user engagement.

• The company has recently secured broadcast rights for the 2030 FIFA World Cup in Spain and Andorra.

• Netflix is betting on its advertising business to diversify its revenue, and Jefferies forecasts its ad revenue will reach $7.5 billion by 2029.

(To assist non-native English speakers, Reuters has provided this report with automated translation into several other languages. As automated translation may contain errors or lack necessary context, Reuters makes no guarantee as to the accuracy of automated translation and provides it only for the convenience of readers. Reuters is not liable for any damage or loss caused by use of the automated translation function.)