Netflix’s recent crackdown on password-sharing likely contributed to a significant boost in subscribers, adding approximately six million new users in the third quarter. As the only profitable major streaming service, Netflix’s unique strategy involved curbing password-sharing outside households, effectively tapping into the vast audience of over 100 million viewers who use its services without subscribing.
Analysts at Bernstein noted that Netflix now closely resembles a utility in many markets. However, the challenge for a maturing company labelled as a utility lies in finding continued growth avenues. To sustain its growth trajectory, Netflix is anticipated to raise prices after the resolution of the Hollywood actors’ strike, which concluded with the Writers Guild of America approving a new contract with major studios recently.
Despite the industry-wide turmoil caused by the strike, Netflix weathered the storm successfully due to its extensive international presence and compelling content offerings.
Following the slow initiation of its ad plan last year, analysts predict that Netflix will likely increase the prices of its ad-free options in the coming months. This move aims to encourage more subscribers to opt for the tier where commercials are included, thereby boosting revenue per user. Many new subscribers who joined Netflix after the password-sharing crackdown opted for the ad-free plans. Currently, Netflix’s standard plan with ads costs US$6.99 a month, while ad-free plans start at US$15.49.
According to Ross Benes, an analyst at Insider Intelligence, Netflix is expected to double its ad-supported viewership next year by implementing these tactics. Over time, the streaming giant is also expected to show more ads to users, aligning itself with its competitors in the industry.
The ad-supported tier is estimated to have generated approximately US$188.1 million in revenue in the third quarter, accompanied by a growth in subscribers totaling 2.8 million, as per Visible Alpha estimates.
Overall, Wall Street analysts anticipate that Netflix will announce its strongest quarterly subscriber additions this year, driven by its strategic moves and compelling programming lineup. The company’s revenue for the third quarter is projected to have increased by 7.7% to $8.54 billion, marking the fastest growth in five quarters. This growth surge is attributed to the strong performance of Netflix’s exclusive shows.
