Netflix Adds 2.4 Million Subscribers Ahead of Ad Tier Launch

Netflix rebounded following two poor quarters, adding 2.4 million subscribers after previously shedding nearly a million in the second quarter—the streamer’s biggest subscriber drop ever. The world’s largest streaming service now has 223.09 million subscribers in the third quarter, handily beating its projected 1 million additions. “After a challenging first half, we believe we’re on a path to reaccelerate growth,” the company said in a letter to shareholders, pointing to the strength of its content in the third quarter as a growth driver. The majority of Netflix’s subscriber additions came from outside the U.S. and Canada, where the company added only 100,000 customers. However, that's a significant improvement over the previous two quarters, where Netflix lost 1.9 million from the region. Growth primarily came from the APAC (1.3 million) and EMEA (600,000) regions. Netflix is predicting 4.5 million paid net adds next quarter. Surprisingly, this will be the last time the company releases its anticipated subscriber additions. “We’ll continue to provide guidance for revenue, operating income, operating margin, net income, EPS and fully diluted shares outstanding for the following quarter, but not paid membership,” the letter reads. Ads are (nearly) here Last week, Netflix lifted the curtain on its upcoming ad-supported tier. Set to launch on Nov. 3 in the U.S., Basic with Ads will debut in a dozen countries and cost $6.99 per month. Netflix said those 12 markets account for approximately $140 billion of brand advertising spend across TV and streaming, representing over 75% of the global market. In the U.S., the streaming service's inventory is nearly sold out, with "hundreds" of brands on board. “The reaction from advertisers so far has been extremely positive and we believe that more choice, especially for more price-conscious consumers, will translate into meaningful incremental revenue and operating profit over time,” the letter explained. “That said, it’s still very early days and, since we’re keeping our existing plans ad-free, it will take us time to build up our membership base and the associated ad revenue.” Netflix’s Ad Tier Is Coming Nov 3 With ‘Hundreds’ of Brands on Board A strong slate As other streaming services test out release models, Netflix maintains that its bingeable release plan drives the most engagement, especially for newer titles, pointing specifically to Ryan Murphy’s Dahmer series and Squid Game as examples. “The ability to watch all of Monster: The Jeffrey Dahmer Story helped drive significant interest in the show,” the letter reads. “We believe the ability for our members to immerse themselves in a story from start to finish increases their enjoyment but also their likelihood to tell their friends, which then means more people watch, join and stay with Netflix.” The streamer started the quarter with the release of Stranger Things 4, which generated 1.35 billion hours viewed—Netflix’s biggest season of an English-language series ever. Season 5 of Cobra Kai (270 million hours) was also strong, and limited series Monster: The Jeffrey Dahmer Story (824 million hours) became its second largest English series. The company also once again cited Nielsen data, saying its share of U.S. TV viewing clocked in at an all-time high of 8.2% in August 2022 (versus 7.6% in August 2021). That number is more than two times the monthly engagement of its next closest streaming competitor. Sharing is (not) caring In the first quarter, Netflix estimated that more than 100 million households had access to the streaming service via password sharing. While it previously indicated it would crack down on password sharing, the streamer has now added more clarity to the situation. Set to roll out in early 2023, “paid sharing” will give borrowers the ability to transfer their Netflix profile into their own account. For users that share accounts, an “extra member” sub-account profile is on the way, which Netflix said will allow account owners to pay for family and friends. “In countries with our lower-priced ad-supported plan, we expect the profile transfer option for borrowers to be especially popular,” Netflix said.

Streaming & OTT

Netflix Snaps Losing Streak, Adds 2.4 Million Subscribers Ahead of Ad Tier Launch

The streamer offered clarity on its upcoming 'paid sharing' plan

Mollie Cahillane

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Mollie Cahillane