Netflix adds 5.9m subs in Q2
July 20, 2023
Netflix added 5.9 million new subscribers in Q2 – way above analysts’ forecasts – after its decision to clamp down on password sharing seemed to pay off. The streaming platform now has 238 million subscribers globally.
Netflix reported a profit of $1.8 billion (€1.6bn) over the quarter on revenues of $8.3 billion.
The company has also announced it is dropping its cheapest commercial-free monthly plan in the US and the UK, in a bid to get more subscribers for its ad-supported option.
The plan had cost $9.99 in the US and £6.99 in the UK and restricted viewers to streaming HD content on one device at a time. Netflix’s cheapest tier is now its $6.99 (£4.99) per month ad-supported tier.
Netflix will now turn its attention to the ongoing Hollywood actors’ and writers’ strike which will have a significant impact on future content. Netflix co-CEO, Ted Sarandos, commented: ” […] we have a lot of work to do, there are a handful of complicated issues, we’re super committed to getting to an agreement as soon as possible, one that’s equitable and one that enables the industry and everybody in it to move forward into the future.”
Paolo Pescatore, TMT Analyst at PP Foresight, described the results as a “robust” quarter for Netflix, with a surge in net adds significantly noticeable.
“This typically is a challenging quarter due to seasonality which bodes well for the year ahead,” he advised. “It is a strong endorsement of its strategy by diversifying its business model into advertising and cracking down on password sharing. Expect further growth with the removal of the basic tier in core markets.”
“However, cracking down on passwords is a short term measure and needs to consider its pricing strategy for the mid-to-long term. During this transition there will ongoing challenges and expect to see spikes in churn, net adds and ARPU with the rollout of new features and services such as advertising.”
He notes that every other streamer is now increasing prices, while Netflix is now extremely competitive with its ad tier.
“It is putting all the building blocks in place for future revenue growth. The company is still in a far stronger position compared to rivals and remains the benchmark,” Pescatore concluded.
Theresa McEndree, Chief Marketing Officer at Recurly, commented: “Netflix’s latest results are a testament to their continued success in the competitive world of streaming services. Recent strategic moves, including the crackdown on password sharing, comes at a time when the industry is searching for innovative ways to attract and retain subscribers.”
“A survey conducted by Recurly revealed that 46 per cent of UK subscribers are saving significant amounts, ranging from £11 to £50 per month, through password sharing. This data clearly shows that the demand for content is there, resorting to sharing passwords to gain access. By recognising this trend and addressing it effectively, Netflix has not only retained existing subscribers but also attracted new ones who value their content.”
“One key factor in Netflix’s results lies in their ability to tailor subscription plans to individual tastes and needs. By offering multiple price points and tiered options, they have allowed subscribers to personalise their experience, strengthening the bond between the company and its customers. This personalised approach not only deepens the subscriber relationship but also enhances the overall subscriber experience, concluded McEndree.
Raj Shah, Industry Lead, Telecom, Media and Entertainment, North America, Publicis Sapient, added: “Streaming used to be about adds. Now it’s about ads. Netflix added 5.9 million subscribers in Q2, bolstered by the password crackdown in 100+ countries, with more borrowers opting to pay than cancel. Netflix needs adds to its ad business to offer advertisers the scale they get from Hulu or Peacock. Could that come from Netflix decision to shut down the basic plan in the US? This could make the price for basic-with-ads more appealing. Finding the right price points to maximise Average Revenue per Membership will be the balancing act for streamers in 2023. In light of the Hollywood actors and writers strike, the Netflix global content strategy looks like a genius move. The longer the strike lasts, the more Netflix gains over competitors with its extensive library and global production that is unaffected by the strike. To extend that gain, more global Netflix products need to become must-see TV in the US, like Alice in Borderland from Japan, and The Glory from Korea.”