Password-sharing problems cause Netflix to have largest decline in new users
At $9.53 billion, overall sales probably increased by 16.4%, the highest rate of growth since the second quarter of 2021.
With viewer focus shifting to summer athletic activities like the Euro soccer tournament and substantial gains following a crackdown on password-sharing Problems, Netflix probably attracted the fewest new members in five quarters between April and June.
Based on LSEG data, the corporation added an estimated 4.82 million users in the second quarter. That would represent about half of the 9.3 million additions it added in the preceding three months and the lowest additions since the first quarter of 2023.
However, the streaming behemoth’s attempts to market a less expensive tier that is funded by advertisements have resulted in a robust increase in ad income. In the June quarter, the company’s ad revenue is anticipated to have more than doubled.
At $9.53 billion, overall sales probably increased by 16.4%, the highest rate of growth since the second quarter of 2021.
Nielsen data indicates that in the second quarter, Netflix’s original programs, including the historical romance “Bridgerton” and the short series “Baby Reindeer,” which is based on comedian Richard Gadd’s encounter with a stalker, topped the most-watched rankings.
Investors will closely examine the streaming behemoth’s efforts to add advertising to its more affordable plan when it releases its second-quarter earnings on Thursday. They will also be looking for information on fresh growth drivers.
The business reported that in May, its ad-supported tier had increased from 23 million in January to 40 million monthly active users worldwide, accounting for 40% of all sign-ups in the countries where it was accessible.
Investors are receptive to the advertising campaign. Compared to the S&P 500 index, which has returned around 19% for the year, Netflix’s stock has increased by almost 35%.
Seasonally, viewership during summer months for Netflix and its rivals such as Disney+ also takes a hit as people travel. This year, the Olympic Games that begin on July 26 are also expected to draw some viewers away from Netflix, according to analysts.
Ad Focus
After investing heavily in originals, brokerage Moffett Nathanson noted Netflix is also able to drive viewership with its competitors’ content. Eighteen of the top 20 streamed titles were acquired shows, such as “NCIS” or “Grey’s Anatomy,” it noted.
Bundling deals have also been revealed by Netflix. For users of Xfinity internet and TV, Comcast offers Apple TV+ and Netflix along with its Peacock streaming service.
Bundling Deals
In an effort to provide events that appeal to advertisers, Netflix is also streaming more live programming, such as its agreement to show two National Football League games on Christmas Day.
According to Ross Benes, senior analyst at Emarketer, “more live-event announcements will ensue as the company looks to improve its ad-supported time spent, amid an industry-wide reduction in scripted content production.”
In May, Netflix revealed intentions to develop an internal ad technology platform that will provide advertisers additional options for purchasing advertising and tracking their effectiveness, in an effort to propel the company’s next phase of growth. Initially, it relied on Microsoft to construct the ad tier’s framework.
Analyst Jessica Reif Ehrlich of BofA Global Research stated in a report on Monday, “Despite this progress, we continue to view advertising as a longer term story and do not expect a material revenue contribution until 2025.”
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