Written by Harshita Mary Varghese
(Reuters) – Netflix reported its slowest subscriber growth in six quarters on Thursday as gains from a password-sharing crackdown eased as investors looked for signs that the company's nascent ad revenue business is accelerating. May report an increase.
The streaming giant likely added 4 million subscribers in the July-September period, according to analyst estimates compiled by LSEG. Netflix originals such as “The Accident” and “The Perfect Couple” were among the most streamed titles in the U.S. during the quarter, according to Nielsen data.
As the pace of subscriptions slows, Netflix is trying to shift investors' attention to other performance metrics such as revenue growth and profit margins. Starting in 2025, it will stop reporting subscriber data.
“Their focus is to continue to add subscribers at a healthy pace while leveraging their scale, ability to raise prices and increase ad spend,” said Jeff Brodarczak, an analyst at Pivotal Research. Ta.
Although the company's ad-supported plans continue to grow, Netflix has not detailed the tier's financial performance and does not expect it to be the main driver of growth until 2026.
This raises some concerns about its growth trajectory.
“Advertising revenue in the U.S. is less than $1 billion a year, and that's not looking good,” said Ross Venez, TV streaming analyst at eMarketer.
Some analysts say the company will have to raise prices and phase out ad-free plans to lure customers into that tier with commercials, as revenue per user typically increases. states.
Last July, the company announced it would no longer offer its commercial-free $9.99/month basic plan to new users in the U.S. and U.K. and would phase it out for existing subscribers.
Netflix charges $6.99 per month for ad inventory in the US, while a standard plan without commercials costs $15.49 per month.
The price of the standard plan has not increased since early 2022, while the price of the ad-supported plan has remained the same since its launch in late 2022.
The company, which operates in more than 190 countries, is expected to report advertising revenue of $242.7 million in the third quarter, according to the average of three analyst estimates compiled by LSEG. Overall sales are expected to increase 14.3% to $9.76 billion, slightly slower than the previous three months.
To attract more advertisers, streamers are focusing on live events, including sports. Netflix will air the highly anticipated Jake Paul vs. Mike Tyson boxing match in November and its first NFL game in December.
The second season of the popular Korean drama series “Squid Game” scheduled for release in December could help the company gain subscribers in the final quarter of the year.
Since announcing its second-quarter results in July, Netflix's stock price has risen 12.4%, compared to a 5% rise in the S&P 500 index.
(Reporting by Harshita Mary Varghese in Bengaluru; Editing by Aditya Soni and Devika Syamnath)