As previously reported, Netflix will begin accepting advertising on its streaming platform in Q4 2022. And, with that, they are offering a lower-priced, ad-supported subscription beginning November 3. Netflix is hoping that this new offering will help make up the 200,000 lost subscriptions from Q1 2022 and nearly 1 million from Q2 2022. They have reported a gain of 2.4 million subscribers outside the U.S. during their recent investor call, with hopes that this growth report would ease investors’ minds as well as answer questions about how much streaming services can continue to grow going forward. It seems like this news, as well as revenue growth in profit, had a positive effect, with Netflix shares increasing more than 10% after the announcement.
Netflix shared with investors that they estimate gaining approximately 4.5 million subscribers in Q4 2022 with the lower-priced monthly package. However, this is still much lower (46% lower) than the subscribers they added in Q4 2021.
Investors’ take on Netflix and other streaming services indicates that they feel subscription growth will continue and that the “death or maturity” of streaming services is exaggerated. They also foresee that other streaming services will begin to offer lower-priced adverting tiers to maintain growth and compete against Netflix.
In addition to the news about the latest subscription package offering, Netflix is also planning to crack down on password sharing. The company estimates that about 16% of Netflix users share passwords, which translates into roughly 100 million households.
Their plan is to offer these shared-password users the ability to transfer their profiles to their own accounts, so that they don’t lose important viewing records currently saved. They will also offer the account holder the option to create subaccounts with those shared users at a higher monthly premium, thus generating revenue on both options. This is definitely an about-face from Netflix’s past remarks that they did not mind password sharing among users. But it is not surprising, coming on the heels of the loss of subscribers and ultimately lower revenue in 2022. What will be interesting to see is how consumers will react to the news and if it will actually help grow subscriptions – or whether there will be pushback from consumers.
Investors and consumers alike will want to see how all of this evolves for the remainder of 2022 and into 2023. Will estimated subscription increases materialize, and how successful will the ad-supported packages really be?