Netflix took big swings with its password crackdown and ad-supported tier, going against previous company policies to try something new at a tricky time in Hollywood with the writers and actors strikes. But those risky moves continue to reap rewards.
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It also marked a continued drawback from the brief span of subscriber losses in early 2022, before the password crackdown and launch of the ad tier, when consumers were pulling back spending amid increasing inflation.
Inflation’s still up, and fears of a recession linger. But Netflix outpaced Wall Street expectations that it would gain 6 million subscribers, about what it added last quarter. It was well ahead of the 2.41 million gain during the third quarter last year and 1.75 million in first quarter.
“The last six months have been challenging for our industry given the combined writers and actors strikes in the US,” noted the letter to investors. “While we have reached an agreement with the WGA, negotiations with SAG-AFTRA are ongoing. We’re committed to resolving the remaining issues as quickly as possible so everyone can return to work making movies and TV shows that audiences will love.”
Netflix Hiking Some Pricing
With success comes another learn into risk taking: There is a price hike coming.
Netflix said it’s keeping its ad plan at $6.99 in the US and Standard plans will stay at $15.49 per month. But Basic is going up to $11.99 per month, and Premium will rise to $22.99, starting today. UK and France prices are also rising.
Netflix Revenue Rises To $8.54 Billion
Netflix has insisted it no longer wants to be judged on subscriber gains, even though it reached an all-time high 247 million global subscribers. Instead, it wants the focus on revenue, at a time when many streamers face challenges monetizing their subscriber numbers, offset by the high pricetag for new content to fill the service.
Netflix reported revenue of $8.54 billion, up 7.7% year over year and up slightly from $8.2 billion during each of the first two quarters of the year. Analysts point out that the ad tier has built slowly, which has forced Netflix to back down from its previous goal of double-digit-percentage revenue increases.
The operating margins were also up slightly, to 22%, another concern for investors.
Big Ad Tier Gains
The company touted its ad tier growth proudly in a note to investors. “Adoption of our ads plan continues to grow — with ads plan membership up almost 70% quarter over quarter — and 30% of sign ups are, on average, to our ads plan, with more work to do to scale this business,” said the note. “Our $6.99 ads plan in the US continues to support our ads plan growth.”
The note to investors noted the password crackdown (it called it account sharing) has been implemented in all of its territories, and it is widely credited by analysts for new signups. Despite consumer grumbling, it has forced millions (Netflix is cagey on the exact numbers) to stop sharing plans.
Netflix has continued to push both the ad tier and password crackdown, which rolled out in new places during third quarter. This week, the company introduced a new ad opportunity letting brands sponsor a single show, and it’s also rolling out ads in live programming, something it’s trying to offer more of.
It’s hardly counting on only those things to grow, though. The strike has underscored how precarious relying only on content can be, and Netflix is expanding its gaming options and adding physical stores in a bid to become more dimensional.
It also recently shut down its decades-old DVD delivery service. The company also touted its big success with Suits, which set a Nielsen record with 614 million hours of streaming in the US in late June.
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