Netflix likely added the fewest number of subscribers in five quarters between April and June, as rapid increases following a crackdown on password sharing faded and viewer attention shifted to summer athletic activities such as the Euro soccer competition.
LSEG records show that the corporation added an estimated 4.82 million users in the second quarter. That would be the fewest additions since the first quarter of 2023, and about half of the 9.3 million added in the preceding three months.
Nonetheless, the streaming giant’s efforts to provide a lower-cost ad-supported tier have resulted in significant ad revenue growth. The company’s ad revenue is likely to more than double during the June quarter. Overall revenue is expected to rise 16.4% to $9.53 billion, representing the greatest growth since the second quarter of 2021.
According to Nielsen data, Netflix’s original shows, such as the historical romance “Bridgerton” and the limited series “Baby Reindeer” based on comedian Richard Gadd’s encounter with a stalker, topped the most-watched lists in the second quarter.
When Netflix reports its second-quarter results on Thursday, investors will look for updates on fresh growth drivers as well as initiatives to expand its lower-priced plan with advertising.
In May, the business announced that its ad-supported tier had surpassed 40 million monthly active users worldwide and accounted for 40% of all sign-ups in areas where it was accessible, up from 23 million in January. Investors have responded positively to the advertising campaign. Netflix’s stock has up about 35% year to date, compared to the S&P 500 index’s return of approximately 19%.
During the summer months, viewership for Netflix and its competitors, such as Disney+, drops as people travel. Analysts predict that this year’s Olympic Games, which begin on July 26, will also take some viewers away from Netflix.
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After investing extensively on originals, stockbroker MoffettNathanson remarked that Netflix may potentially drive viewership using material from its competitors. Eighteen of the top 20 streamed titles were acquired shows, including “NCIS” and “Grey’s Anatomy,” the report stated.
Netflix has also announced bundle deals. Comcast’s Xfinity internet and TV users may now access Netflix through its Peacock streaming service and Apple TV+.
Netflix is also hosting more live content, such as a partnership to stream two National Football League games on Christmas Day, in order to provide advertiser-friendly experiences.
“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,” said Ross Benes, senior analyst at Emarketer.
Netflix revealed plans in May to establish an in-house ad technology platform that will provide marketers with more ways to buy commercials and track their performance. It initially relied on Microsoft to provide the backbone of the ad layer.
“Despite this progress, we continue to view advertising as a longer-term story and do not expect a material revenue contribution until 2025,” BofA Global Research analyst Jessica Reif Ehrlich wrote in a report on Monday.
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