Daily Management Review

Will Netflix's Pricing Reductions And Ad-Supported Model Bring In New Users?


Investors will closely examine if recent price cuts and the introduction of an ad-supported plan are luring customers to subscribe and stick with Netflix Inc., which is expected to report that it added about 2 million subscribers in the first quarter.
The company, which lost 200,000 customers in the previous quarter, resumed subscriber growth in the second half of 2022, but the rate of additions has substantially slowed, requiring it to consider strategies for extracting money from the 100 million users who use the service for free.
In order to achieve this, the streaming giant has tightened down in several countries on password-sharing, or the streaming of Netflix by non-members who do not belong to the same household. Analysts predicted that while this may initially cause users to stop using the service, they would likely return.
According to Rosenblatt Securities analyst Barton Crockett, the crackdown will have a "more meaningful impact" in the June quarter and Netflix might add more than 10 million new subscribers as it converts free users to paid ones.
According to 16 experts surveyed by Refinitiv, Netflix is predicted to add 3.43 million customers between April and June, up from 970,000 users lost during the same quarter last year.
In comparison to a loss of 200,000 subscribers a year earlier, the company expects to have added a net 2.07 million subscribers in the quarter that concluded on March 31. Netflix no longer provides predictions for the metric.
Refinitiv estimates that Netflix will report first-quarter revenue growth of close to 4%, which would be the second-slowest growth rate in company history following a nearly 2% increase in the December period.
According to Jefferies, non-English programs like the third season of the Mexican soap "La Reina del Sur" and the Korean revenge drama "The Glory" did well during the March quarter despite the lack of major releases.
Walt Disney Co., Amazon.com Inc., and Warner Bros Discovery have all posed a significant threat to Netflix.
According to consultancy company Parks Associate, Amazon dethroned Netflix as the leading streaming service in the United States last year.
On Wednesday, Warner Bros announced that it will combine Discovery's reality shows with HBO Max's written entertainment to create a new streaming service dubbed "Max" that would debut on May 23.
After years of avoiding advertisements, Netflix in November launched a streaming package with advertising for $6.99 per month in 12 regions. HBO Max, Disney+, and Hulu are already ad-supported possibilities.
"The role of advertising continues to grow in importance to premium (streaming services) as a part of their profitable growth strategies," social media analytics firm Antenna said in a note last month.
"In 2020, only one in five new sign-ups were to ad-supported plans; last year, it was nearly one in three."