AFP

Netflix reported losing subscribers for the second quarter in a row Tuesday as the streaming giant battles fierce competition and viewer belt tightening, but the company assured investors of better days ahead.

The loss of 970,000 paying customers in the most recent quarter was not as big as expected, and left Netflix with just shy of 221 million subscribers.

“Tough in some ways, losing a million and calling it success, but really we are set up very well for the next year,” the company’s co-chief and founder Reed Hastings said in an earnings presentation.

The company said in its earnings report that it had expected to gain a million paid subscribers in the current quarter.

Netflix shares were up slightly in after-market trades — a sign that investors were remaining faithful.

Analysts noted that the results, even if not as poor as feared, were still troubling.

“Netflix’s subscriber loss was expected but it remains a sore point for a company that is wholly dependent on subscription revenue from consumers,” said analyst Ross Benes.

Benes added that “unless it finds more franchises that resonate widely, it will eventually struggle to stay ahead of competitors that are after its crown.”

– Fewer free rides –

Netflix executives have made it clear the company will get tougher on sharing logins and passwords, which allow many to access the platform’s content without paying.

“It’s great that our members love Netflix movies and TV shows so much they want to share them more broadly,” director of product innovation Chengyi Long said Monday in a blog post.

“But today’s widespread account sharing between households undermines our long term ability to invest in and improve our service.”

Long said that an “add a home” subscription feature that Netflix in March began testing in Chile, Costa Rica, and Peru will be expanded to Argentina, the Dominican Republic, Honduras, El Salvador, and Guatemala.

Netflix said it is aiming to have an account-sharing payment system deployed broadly by next year.

Meanwhile, Netflix is working with Microsoft to launch a cheaper subscription plan that includes advertisements, which The New York Times has reported could launch by the end of this year.

Netflix opted to develop the lower-cost offering after a disappointing first quarter in which it lost subscribers for the first time in a decade — and after years of resistance against the very idea of running ads. 

Microsoft will be responsible for designing and managing the platform for advertisers who want to serve ads to Netflix users.

“These earning results buy them time, and they need time to focus on stopping the bleeding,” analyst Rob Enderle of Enderle Group told AFP.

“Netflix is facing a significant amount of competition; to hold on as well as they have is an example of how resilient they are but they are not out of the woods.”

– ‘Stranger Things’ –

Netflix has been investing heavily in original content such as hit shows “Squid Game” and “Stranger Things” to fend off powerhouse competitors such as Disney, with its Marvel and Star Wars franchises.

The recently released fourth season of “Stranger Things” racked up 1.3 billion hours of viewing in just four weeks at Netflix, making it the platform’s biggest-ever English language television release, according to the company.

Meanwhile, some 284 million hours were spent watching the latest season of “The Umbrella Academy,” executives said.

Action-thriller film “The Gray Man” — based on a novel of the same name, and set for release on Netflix on Friday — is “mind-blowing,” co-chief Ted Sarandos said in the earnings presentation.

“Netflix’s ability to produce smash hit content is undoubted,” said GlobalData managing director Neil Saunders.

“However, with the loss of almost one million members since the prior quarter, translating this into commercial success is proving to be more of a challenge.”

Challenges facing Netflix include changing habits, as house-bound people who signed on for the service during the height of the pandemic are re-evaluating their subscriptions now that they are resuming their former lifestyles, Saunders noted.

The analyst pointed out that Netflix had about 27.7 million more paid subscribers in the recently ended quarter than it did in the same period a year earlier.

“Despite the slowdown, Netflix isn’t in trouble,” Saunders said.

“However, to get back into growth it will need to change — but that change needs to be more about evolution than revolution.”

Russian shelling pounded eastern and southern Ukraine Tuesday as President Vladimir Putin said Moscow would only ease the path for Black Sea exports of Ukrainian grain if the West lifts sanctions on Russian shipments.

Russian strikes hit the eastern city of Kramatorsk on Tuesday, killing one person, local authorities said.

AFP journalists said a four-story residential building had been hit in the city in the Donbas region. One man with a bloodied head lay on the ground, before being taken away by the emergency services.

“He was just walking by and was hit,” said one woman, who declined to give her name, visibly shaken after the bombardment.

Russia’s invasion of Ukraine in February has killed thousands and displaced millions from their homes, but also hampered shipments from one of the world’s biggest exporters of wheat and other grain, sparking fears of global food shortages.

Putin, in Tehran for talks with his Turkish counterpart Recep Tayyip Erdogan, on Tuesday said “progress” had been made in discussions towards exporting grain from Ukraine.

After talks with both Erdogan and Iran’s president, Putin told reporters that any deal hinged on the West’s willingness to yield some ground.

“We will facilitate the export of Ukrainian grain, but we are proceeding from the fact that all restrictions related to air deliveries for the export of Russian grain will be lifted,” he said.

NATO member Turkey has been using its good relations with both the Kremlin and Kyiv to try to broker an agreement on a safe way to deliver the grain.

– ‘Victory before winter’ –

On Wednesday, Russian and Ukrainian delegations are due to meet in Istanbul alongside Turkish and UN representatives, with hopes rising for an announced accord.

The EU’s foreign policy chief Josep Borrell warned this week that the grain impasse was “an issue of life and death for many human beings”.

And a document consulted by AFP Tuesday showed that the European Commission is proposing to unblock assets at Russian banks linked to trade in food and fertiliser.

Along the Black Sea coast, Kyiv said that a barrage of seven cruise missiles had wounded at least six people, including a child, in the southern and coastal region of Odessa.

The Russian defence ministry claimed that strikes on Odessa had destroyed a stockpile of Western-supplied weapons.

Russian Defence Minister Sergei Shoigu ordered Russian troops earlier this week to prioritise the destruction of long-range artillery supplied by the United States and Ukraine’s other Western allies.

Observers credit the weapons with altering battlefield dynamics, giving Ukraine the capacity to hit Russian arms depots and command posts deep inside territory controlled by Moscow.

Ukrainian Defence Minister Oleksiy Reznikov, during a visit to the United States, urged the West to drastically step up its supply of precision rocket systems, calling them a “game-changer”.

In Washington, National Security Council spokesman John Kirby said the United States believes that Russia is moving ahead with plans to annex more Ukrainian territory. 

“Russia is beginning to roll out a version of what you could call an annexation playbook, very similar to the one we saw in 2014,” when it invaded and eventually annexed Crimea, Kirby said.

Zelensky’s chief of staff Andriy Yermak underlined in an interview published Tuesday that Ukraine had to win its war with Russia before winter, telling Ukrainian weekly Novoye Vremya that if Moscow has time to regroup, it will be “more difficult”.

– Suspected treason –

Ukrainian lawmakers earlier on Tuesday endorsed the president’s decision to sack the country’s top prosecutor and security chief, backing Ukraine’s largest political shake-up since Russia invaded.

Several Ukrainian deputies writing on social media said lawmakers at the parliamentary session in Kyiv had overwhelmingly backed President Volodymyr Zelensky’s shock call to remove the senior officials.

“Parliament voted to dismiss Iryna Venediktova as prosecutor general,” said David Arakhamia, a lawmaker affiliated with Zelensky.

Other deputies said the plea to remove security chief Ivan Bakanov had secured the required 226 votes.

Zelensky late Sunday said he was suspending the senior law enforcement officials — and that 650 cases of suspected treason were under investigation.

He replaced Bakanov on Monday and described the shake-up in the security services as an “audit”, saying 28 security officials were facing dismissal.

The governor of Mykolaiv, a southern region under constant Russian rocket fire, meanwhile on Tuesday promised a $100 reward for anyone who could help to identify people who have been collaborating with Russia by providing it with the locations of Ukrainian troops or coordinates of potential targets. 

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The US House of Representatives passed a bill on Tuesday that would provide federal protection for same-sex marriage amid fears that the Supreme Court could roll back recognition of such unions.

The Respect for Marriage Act was approved in the Democratic-controlled chamber by a vote of 267 to 157, but its prospects are uncertain in the Senate.

Forty-seven Republican lawmakers joined Democrats in voting for the bill, which was met with scattered applause on the House floor when it passed.

Democrats have 50 seats in the 100-member Senate and 10 Republican votes would be needed to bring the measure to the floor.

The Respect for Marriage Act would force US states to recognize a valid marriage performed in another state, providing protection for not only same-sex unions but also interracial marriages.

The bill repeals the 1996 Defense of Marriage Act that defined a marriage as a union between one man and one woman.

The Supreme Court, in a 5-4 ruling, struck down part of the Defense of Marriage Act, which denied federal benefits to married same-sex couples, in 2013 but the law had remained on the books.

“The bipartisan Respect for Marriage Act will enshrine and protect marriage equality and make sure legal, same-sex and interracial marriages are recognized,” said Senator Tammy Baldwin of Wisconsin.

The Supreme Court overturned Roe v Wade, the 1973 ruling enshrining nationwide abortion rights, on June 24, sparking forecasts that conservative justices could revisit other landmark decisions.

Same-sex marriage remains a high-value target for some Republicans and the religious right in the United States, although 71 percent of Americans in a Gallup poll in May said they support such relationships.

By bringing the Respect for Marriage Act to a vote in the House, Democrats forced Republicans to go on the record on the issue ahead of the November midterm elections.

Clarence Thomas, one of the most conservative justices on the court, in his concurring opinion overturning abortion rights, ignited fears that other progressive gains could also be in danger.

Thomas argued that the court should also examine its rulings on contraception and same-sex marriage.

Thomas — whose wife Ginni Thomas has pushed false claims that Donald Trump won the last election — was the only judge making such arguments out of the nine who sit on America’s highest court.

But the court’s shift to the right under Trump, who appointed three new conservative justices, has Democrats, activists and progressive groups fearing its future rulings.

The House plans to vote later this week on the Right to Contraception Act, which would protect access to contraceptives.

A high-stakes court battle between Elon Musk and Twitter began Tuesday in Delaware, a tiny slice of America’s east coast best known as the nation’s oldest state.

Yet it’s also the legal home for many corporations, drawn by its reputation as a tax haven and expertise in settling business disputes.

Here’s a closer look at Delaware:

– Fortune 500 –

Twitter chose in 2007 to incorporate in Delaware, less than two hours’ drive northeast of Washington, instead of California, where the social network has its headquarters.

The one-to-many messaging platform is not alone: beverage giant Coca-Cola, mega-retailer Walmart and aerospace titan Boeing are all registered in Delaware.

In fact, more than 1.6 million companies have taken up legal residence in the state, according to official data from the Delaware Business Service. 

That’s far more than the state’s population of about 970,000.

More than two-thirds of businesses on the Fortune 500 list of the largest US companies have chosen Delaware as their legal base.

A post office box is often the only physical presence many of those companies have in the state.

– Taxes and transparency –

Among the reasons that companies register in Delaware is the state’s reputation for the ease and speed with which it can process a business registration.

For $1,000, the Delaware government’s division of corporations can register a new entity in one hour. 

In other states, the average processing fee is $100-$200 but takes a full business day.

This procedural ease also comes with limited transparency: Delaware does not require the name of the actual beneficiary at the time of registration, thus allowing companies to guarantee almost total secrecy to their owners.

As a result, shell companies flourish on US soil, as revealed by the Panama Papers in 2016.

The lack of transparency is matched by an advantageous tax policy for companies.

If a company does not conduct its operations in the state — which is the case for a majority of major names registered there — then it does not have to pay income tax. 

Instead, the organization pays a much more modest franchise tax.

As a result, Delaware is often considered a tax haven for companies — despite the state’s insistence to the contrary.

– Legal system –

With this glut of businesses, a whole legal system has developed in Delaware, giving it a reputation for expertise in handling corporate litigation.

The Musk-Twitter case will be heard in the Delaware Court of Chancery, a court specializing in business law that was established in 1792, modeled on a British court of the same name.

“The Delaware Court of Chancery is widely recognized as the nation’s preeminent forum for the determination of disputes involving the internal affairs of the thousands upon thousands of Delaware corporations and other business entities,” the court says on its website.

The court notes that its decisions largely turn on the concept of fiduciary duty, which is the commitment to act in the best interest of someone or something else.

And, most notably in the United States, the court does not use a jury to decide a case.

During the first hearing Tuesday, Judge Kathaleen McCormick set the Musk-Twitter trial to begin in October.

Twitter notched an early win Tuesday in its fight with Elon Musk, after a judge agreed to a fast-track trial on whether to force the Tesla chief to complete his $44 billion buyout of the social network.

Musk’s lawyers had pushed for a February 2023 date, but the court in the eastern US state of Delaware hewed closely to the uncertainty-wracked platform’s desire for speed and set an October start.

Billions of dollars are at stake, but so is the future of Twitter, which Musk has said should allow any legal speech — an absolutist position that has sparked fears the network could be used to incite violence.

Judge Kathaleen McCormick, who set a five-day trial and left the sides to work with the court to fix the exact date, noted that the “risk of irreparable harm” generally grows the longer a merger remains in limbo.

Musk’s team argued fiercely against an relatively quick date, saying the core issues are simply too complex.

“Billions of actions on their platform have to be analyzed in order for us to get to the bottom of the real issue,” said Musk lawyer Andrew Rossman.

“The real issue here is what’s the percentage of real users on the Twitter platform versus spam or false accounts,” he added.

After pausing the deal in May, Musk moved in early July to “terminate” his unsolicited buyout bid after he accused the platform of misleading him on the number of its so-called “bot” accounts, and not being forthcoming with details.

Twitter has argued his claims are simply an effort by him to back out of the deal, and its lawyer William Savitt said “the continued uncertainty caused by Musk’s purported termination inflicts harm on Twitter every day, every hour of every day.”

Experts watching the trial saw the relatively rapid timeline as a triumph for the social network, which is limping along while the buyout endgame remains unclear.

“I think it was pretty favorable for Twitter. She didn’t give them exactly what they wanted, but she gave them a pretty speedy trial,” said Adam Badawi, a University of California at Berkeley law professor.

The social network’s lawyers had asked for a September date, just months after Musk launched a bid that the company’s board initially resisted but then supported.

The world’s richest person has backed away from the deal in recent months as tech stocks have tumbled, and Twitter’s value has fallen well below the $54.20 per share he offered.

– Musk willingness to fight –

Rather than Silicon Valley, where Twitter is based, the company has lodged its lawsuit against Musk in Delaware.

The firm is incorporated in the tiny state like scores of other companies, and the case will be heard in the Delaware Chancery Court, which has deep experience in business disputes.

“The Chancery Court, which handles most of these matters, is very expert in corporate law, and more particularly, mergers and acquisitions. So this is the place to go,” said Carl Tobias, a University of Richmond law professor.

McCormick, who ran the hearing remotely after she tested positive for Covid-19, comes with a no-nonsense reputation.

She also reportedly has the distinction of previously ordering a reluctant buyer into completing a corporate merger.

A forced closing of the Twitter deal is a scenario that some analysts consider possible.

“(Wall) Street and legal experts across the board view Twitter as having a ‘strong iron fist upper hand,’ heading into the Delaware court battle after months of this fiasco and nightmare,” analyst Dan Ives wrote last week.

He also noted that less likely options include Musk paying a $1 billion break-up fee and being able to walk away, or winning outright on his fake account argument.

Tuesday’s hearing was just the first step in what could be a lengthy legal fight that could end in a trial, but also a settlement.

“Musk has shown his willingness to take things all the way to the end in Delaware court,” said Badawi, the Berkeley law professor.

“I think settling is not necessarily his instinct.”