[Image credit: Netflix]
When Netflix announced an ad-supported tier it felt like a rubicon had been crossed, like some of the fundamental contract of that service and streaming in general had been broken.
And now customers don’t seem to care
According to Netflix’s latest earning data, it has 277 million subscribers and its ad-supported plan members now make up more than 45% of signups in markets where it offers ads. Turns out people are happy with ads if they make things cheaper. In its letter to investors, the company said:
We’re making steady progress scaling our ads business. Ads tier membership grew 34% quarter on quarter, and we’re building an in-house ad tech platform that we’ll test in Canada in 2024 and launch more broadly in 2025.
Asking an analyst question, Co-CEO, President & Director Gregory K. Peters said:
We’ve been scaling our ads member base very quickly from 0 2 years ago to where we are today. And we’re excited to say that we’re on track to achieve our critical scale goals for all of our ads countries in 2025. Clearly, we expect further growth beyond that, but that represents a great threshold to get to and then to build more scale and more attractiveness from there.
Netflix Results Not All Good News
As Tom Harrington of Enders Analysis noted in a new report, it’s not all good news for the streaming giant:
Management offered insight into one downward pressure on ARPU which is that its advertising-supported tier produces lower revenue per user than its advertising-free offers: an about-turn on its claims soon after the launch of ads which emphasised the relative value of these subscribers.
He also highlighted the growing importance of older viewers. The average Netflix user aged under 35 is viewing a smaller amount this year than they did last year, while “those over 35 increased their daily viewing of Netflix by ~3 minutes per day in H1 2024, about a 10% uplift.”
The growth of viewers over 55 is also noticeable. Harrington believes it will influence Netflix’s strategy going forward.
Ads… older viewers… sounds an awful lot like cable.
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