New ad-supported tier is a hit

New ad-supported tier is a hit

Netflix may regret waiting so long to launch an ad-supported tier. Based on its fourth quarter performance, the new service is a box office hit.

Netflix reports its fourth-quarter results on Thursday
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said it added 7.7 million subscribers, well above expectations for the streaming service and triple the number in the third quarter. This brought the total to 230.8 million subscribers worldwide.

The streamer attributed some of that accelerated growth to the launch of a lower-priced, ad-supported tier in November, something the company had long resisted under co-CEO Reed Hastings.

It’s tempting to read some of it, but around the same time Netflix released its earnings data, Hastings said he’s stepping down from the helm of the company he co-founded and moving on to become chairman of the board. There’s certainly a lot of speculation about the reason for this (Hastings said in a blog post announcing his exit that it’s been in the works for a while), and his apparently misplaced disinterest in advertising could be seen as the reason.

But getting back to the numbers, Netflix said ahead of the earnings call, which would likely blunt expectations, that it doesn’t expect the ad-supported tier to have a meaningful impact on the fourth quarter. It forecast a gain of 4.5 million subscribers. The ad-supported tier clearly contributed to the gains, although Netflix declined to see exactly how many new subscribers the ad-supported tier had.

However, a report released today by Ampere Analysis says daily subscription signups skyrocketed by more than 50 percent in the first few days the ad-supported tier was available. Netflix has had its best sign-up rate since the pandemic began in April 2020 during this period (November 3-5). Nearly 10 percent of new subscriber signups are now for the ad-supported tier, according to the report.

The bigger numbers came at a time when the streamer needed the shot in the arm.

Netflix lost subscribers in the first and second quarters of last year before recovering somewhat in the third quarter. Everyone had a theory about the declines, the first in a decade for the longtime streaming leader, which (depending on how you lump the numbers) has fallen behind Disney’s streaming service Disney+ in terms of total subscribers — though so has Disney ESPN+ and Hulu are among those subscribers. So the claim is murky.

Some people blamed Netflix’s big price hike for the drop in subscribers. Others pointed to inflated profits during COVID that may never last if lockdowns are lifted. The streamer claimed that password sharing is eating subscribers and has vowed to crack down on it in 2023.

As for Netflix’s other numbers, revenue at $7.85 billion lagged behind projects at $8.1 billion. It marked the slowest growth since 2002, up 1.9% year-on-year. Earnings per share were also well below expectations. Netflix said in its third-quarter earnings release that going forward it would focus more on revenue as its key metric than subscribers — but based on today’s results, you’d expect the company to scale back a bit.

Among other earnings release highlights, Netflix said Wednesday was the #3 series of all time Glass Onion: A Knives Out Mystery is the fourth most popular film of all time. And the documentary Harry & Megan is the second-best documentary of all time on the service and benefits from the release of Prince Harry’s well-loved memoir. spare part.

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