Netflix’s ad-supported tier continues to gather steam, but another competitor is on the way.
The streamer added more than 13 million subscribers globally in its most recent quarter, it said this week, surpassing analyst estimates and bringing its total subscriber count to 260.3 million households globally.
The US and Canada, where Netflix makes the most monthly revenue per user of any other region ($16.64 per member as of Q4, up slightly year over year), counted more than 80 million total subscribers, up 2.8 million compared to Q3. The biggest subscription surge, though, came from the streamer’s European business, where members grew by 5 million in the quarter, bringing the total subscriber base there to nearly 89 million.
Ad growth: In addition to its overall subscriber growth, Netflix’s ads business continues to increase: The streamer’s ad-supported tier, which first rolled out in November 2022 and costs $7 a month, now has 23 million monthly active users, co-CEO Greg Peters said in a call with investors, up considerably from the 15 million monthly active users the company last reported in November. Ad-supported membership grew almost 70% quarter over quarter, and the streamer’s ads plan makes up 40% of sign-ups in its ads markets, the company disclosed in its shareholder letter.
Pay up: Netflix said its password-sharing crackdown, which includes charging certain members more for watchers outside their households, has helped encourage additional growth after some slowdown in 2022 and 2023. In the letter, the company said that “many millions” of Netflix users are now using the paid sharing features.
“We believe we’ve successfully addressed account sharing, ensuring that when people enjoy Netflix they pay for the service too,” the letter read.
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Streamers including Netflix have successfully raised prices in recent years to help boost revenue while pushing further into advertising. After raising prices on its ad-free viewing tiers late last year, the streamer will soon make it even more expensive to watch Netflix without ads: Beginning in Q2, the company plans to phase out its Basic plan in some areas where the ad-supported tier is available, starting with Canada and the UK.
Another streamer is just now pushing into ads: Next week, Amazon Prime Video will roll out its own ad-supported tier, which will become the default viewing experience for all its subscribers unless they pay extra.
Peters said that Netflix considered making its own ad tier the default option for subscribers, but ultimately decided against it.
“Given our long history of not having ads, we thought it was better for our members rather than force them into a change and give them ads. But better to attract them to the ads plan for the ones that wanted it based on the benefits,” he said.
Buy, buy, buy: A report recently released by market intelligence firm SensorTower found that Netflix’s ad tier is increasingly popular with certain advertisers. According to the report, shopping advertisers increased ad spend on Netflix an average of 13% quarter over quarter between Q2 and Q4 2023, and nine of the top 10 advertisers on the platform hiked ad spend by an average of 181% quarter over quarter in Q3. Netflix also notched the second-highest share of shopping advertiser spend among streamers for most of 2023, the report found.
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