Netflix is great at making money. Its problem is keeping viewers hooked

Nicole Sperling

Netflix reported a 12% increase in quarterly revenue, but acknowledged that stagnant viewership, particularly in the US and Canada, was a major concern. Photo / Getty Images

After a tumultuous week when Netflix laid off 1000 employees and fired its chief content officer and top two film executives, the world’s largest streaming service showed that one thing isn’t in flux: its ability to make boatloads of money.

The company said Tuesday that its revenues in the third quarter grew 12% from a year earlier, to nearly US$12.9 billion ($22.7b), its lowest quarterly revenue percentage growth in three years. Net income rose 44%, to nearly US$3.7b.

For the year, Netflix said, it expects revenue growth to be 13%, roughly in line with its previous estimates. Shares dropped more than 5% in after-hours trading.

The company acknowledged the undercurrent that led to the recent tumult: concern about stagnating attention time on its service.

“We know there’s some investor concern about our view-hours growth”, particularly in the United States and Canada, Netflix told investors in a letter. Revenue in those countries grew 11% in the most recent quarter, down from 17% a year earlier.

“There is no need for a fundamental shift in the strategy,” Ted Sarandos, a co-CEO of Netflix, added during an investor conference call after the earnings were announced. “We do need better execution in the US.”

At the moment, despite being the most-watched paid streaming service in the world, with 325 million subscribers, the company is not growing fast enough for either its top executives or its shareholders.

Dan Lin, the chairman of Netflix’s film division, in New York. Photo / Ahmed Gaber, The New York Times

The time that viewers spend on the service has stagnated, as YouTube increasingly becomes a competitor. Netflix has struggled to create a pipeline of new hits to replace shows such as Stranger Things and Squid Game. Returning shows such as Beef, The Night Agent and Avatar: The Last Airbender lost significant viewership for their most recent seasons, according to Netflix’s metrics.

And no film released this summer became a breakout hit, a contrast with last summer, when KPop Demon Hunters and Happy Gilmore 2 captivated viewers.

“Netflix has an engagement problem, and that’s a worrying trend going forward,” Investing.com senior analyst Jesse Cohen wrote.

“Users are drifting toward TikTok and YouTube for the attention Netflix used to own and the trimmed full-year outlook is basically management admitting they can’t see a way back to growth on the current trajectory. Netflix needs another hit on the content side.”

Netflix’s stock has been on a slide since September last year, when it announced its intention to purchase Warner Bros Discovery’s studio and streaming business in a nearly US$83b deal. Even after the company bowed out of the pursuit, not willing to get in a bidding war with the eventual victor, Paramount Skydance, the stock continued to languish. Its price is down nearly 45% from a year ago.

Still, last week’s shake-up jolted Hollywood. A day after Netflix announced it was cutting 6% of its workforce, it fired Bela Bajaria, a well-respected company veteran who, as chief content officer the past three years, expanded Netflix beyond scripted TV shows and movies into reality shows, live events, sports and video podcasts.

Taking her place next week is Peter Rice, a film and television executive who spent 30 years at Fox before becoming a top executive at Disney.

“Peter brings expertise in both art and commerce,” Sarandos said. Rice has run a movie studio (21st Century Fox); made content for a TV network (ABC), a streaming service (Disney+) and a prestige cable channel (FX); and produced films (The Social Reckoning, 28 Years Later).

Most important, Sarandos added, Rice “understands talent relations and in a competitive market, creative talent have choices of where they want to work and we want Netflix to always be the place that they love to do the best work of their life”.

One of Rice’s first decisions will be choosing a top film executive to replace Dan Lin, who was fired last week after two-and-a-half years at the company. Lin’s mandate to lower production costs and be more selective about what the streaming service makes faced great resistance by the talent. Directors Noah Baumbach and David Fincher ended their relationships with the company.

According to a letter that Lin sent to his team on his departure, which was obtained by the New York Times, the 53-year-old executive accomplished many of his goals. “For our film slate the past two years, per-title views are up 12% and view hours are up 11%,” he wrote, adding that in the first half of 2026, 10 of Netflix’s 13 films were rated “loved” by subscribers.

He leaves behind a robust slate of movies, including The Mis-Adventures of Cliff Booth — a sequel of sorts to Once Upon a Time ... in Hollywood, with a script from Quentin Tarantino and directed by Fincher. It will receive a two-week exclusive IMAX run this year, as will Pete Berg’s war drama, The Mosquito Bowl. Next year will bring Narnia: The Magician’s Nephew, directed by Greta Gerwig (Barbie) and an animated Charlie vs. the Chocolate Factory.

Many in Hollywood are curious whether Rice will expand Netflix’s tentative foray into releasing films in theaters before they appear on the service. Sarandos has for years insisted that theatrical distribution is “an outmoded idea” and that Netflix movies are made for its subscribers.

This past weekend, in a first, the company reported box office grosses for La Bola Negra, a Spanish-language multigenerational epic that it acquired at the Cannes Film Festival. The film will remain in theatres for 45 days before it debuts on the service.

“We have one week of public reporting of box office under our belt and we’re real happy about it,” Sarandos said with a halting laugh. “So let’s check in again in about six months.”

Netflix’s television team has also been busy buying up projects over the last year. The streamer gave a straight-to-series order to The Corrections, an adaptation of Jonathan Franzen’s 2001 novel, with Meryl Streep expected to star and Cord Jefferson (the writer and director of American Fiction) expected to direct the limited series. Netflix also ordered Rabbit, Rabbit, a thriller starring Adam Driver and Regina Hall that is expected to premiere next year.

Production also began recently on an adaptation of the Dan Brown novel The Secret of Secrets. Carlton Cuse (Lost, Jack Ryan) is the showrunner and it stars Morgan Spector (The Gilded Age).

The company is banking on these movies and shows, and Rice’s changes, to reverse the trend of subscribers’ engagement with its offerings. Netflix accounted for 7.8% of all television viewing time in the United States in July, according to Nielsen, a full percentage point drop from a year earlier. YouTube’s share was more than 14%.

Despite all the turmoil, Netflix maintains a loyal following. According to a report released on Tuesday (local time) by Antenna, Netflix has the lowest churn numbers, or cancellation rate, of any streamer.

This article originally appeared in The New York Times.

Written by: Nicole Sperling

Photographs by: Ahmed Gaber