Following the news that Netflix added 7.7 million subscribers in Q4;
Francesca Gregory, Thematic Analyst at GlobalData, a leading data and analytics company, offers her view:
“Netflix finished a tough year with substantial subscriber growth, as popular content kept streamers glued to their screens. Netflix has not lost its ability to create unmissable shows, as shown by the success of the hit series ‘Wednesday’ in Q4. However, the prospect of the platform recapturing its previously breakneck subscriber growth remains slim as the wider streaming market experiences a slowdown.
“Although Netflix hopes to diversify its revenue streams to counter this challenge, the rollout of its ad-supported tier was a delayed response to industry headwinds. While CEO Reed Hastings admitted to mistakes, and has now stepped down, the company’s belated decision to move into advertising could prove costly. Netflix must make up for lost time by quickly refining its ad-supported service to outcompete rival platforms.”
Sarah Coop, Analyst at GlobalData, offers her view:
“Increased competition, a saturated market, and a cost-of-living crisis will see the streaming wars enter a new frontier in 2023. Minimal growth in overall subscription numbers is predicted across Netflix’s core markets. According to GlobalData forecasts, the average number of subscription video on demand (SVoD) subscriptions per UK household will increase from 2.2 in 2022 to 2.3 in 2023. In the US, average subscriptions will increase from 3.1 to 3.3, and in Canada, average subscriptions per household will remain the same, at 2.2.
“These modest increases suggest many households will not be adding new services or will jump around based on new content. Consequently, paid password sharing and interoperable bundled services will be key strategies to maintain market share and raise subscription numbers by cracking down on account sharing.”
Martina Raveni, Analyst at GlobalData, offers her view:
“Netflix must now play catch up with competitors who were early ad integrators. HBO Max introduced an ad-supported tier in June 2021, and this subscription type reportedly now accounts for around 30% of customer additions. This is an interesting benchmark for Netflix in the short to medium term, as it finds out if this significant change in its business model can fund spiraling content spending.
“For Netflix’s ad plan to succeed, it needs accurate targeting and measurement. The coming months will be an important test for ad-supported subscriptions as the ongoing cost-of-living crisis causes many consumers to rationalize their spending on subscriptions.”
