Netflix Sees Big Subscriber Increase, Unfolds Plans to Hike Prices and New Ad Strategies
One Piece. (L to R) Emily Rudd as Nami, Iñaki Godoy as Monkey D. Luffy, Mackenyu Arata as Roronoa Zoro in season 1 of One Piece. Cr. Casey Crafford/Netflix © 2023
On Wednesday, Netflix provided its numbers for the third quarter of fiscal 2023. In a letter to shareholders, they announced a net increase in their global subscriber base of 8.76 million. It’s their biggest uptick since Q2 2020 and represents a 10.8% increase with respect to last year. The global number of subscribers now sits at 247.15 million.
This is the latest result from what is now known as the Great Netflix Correction of 2022, which started after the company notified at the end of their first quarter of their first net loss of subscribers in a decade. That started a chain reaction felt all over the streaming landscape after Wall Street reacted poorly to the news. Since then, the global number of subscribers is no longer a meaningful figure to investors — they are more interested in economic growth, free cash flow, and profitability. Netflix’s counter-measures consisted of two items: a global crackdown on password sharing, and the introduction of ad-supported plans. Disney Plus has since then followed suit on both of those strategies, for instance.
The ad-supported plans are essential now to the platform, as Netflix gets more money per user subscribed to its ad-based option than they do from the ad-free plan subscribers. And the popularity is growing as well. While it hasn’t been implemented in all regions yet, the company reported that its ads plan membership is up 70% from quarter to quarter, and 30% of new subscribers choose that option when signing up. However, these numbers are still not up to Netflix’s expectations, and Ted Sarandos even admitted during last week’s Bloomberg’s Screentime conference that it is “definitely not at the scale that we want it to be at yet.” Its ads chief Jeremi Gorman left earlier this month and has since been replaced by Amy Reinhard.
During a keynote at Advertising Week New York on Tuesday, Peter Naylor, VP of Global Advertising Sales at Netflix, announced the next steps for their ad strategies, in three possible offerings. First, they will allow brands to become premier sponsors of a show or season; they even announced their first partnership, as Smartfood will be the title sponsor of the new season of Love Is Blind. Note that this will not be just for the ad-plan users, but all Netflix subscribers.
They will also introduce the “Binge” model (working title), where after watching two or three episodes in a row, interrupted by plans, they will reward the viewer who keeps watching by allowing them to watch the next one free of ads, if they first watch a minute-long promo. As Naylor put it:
“If you’re watching two or three episodes in a row — which we’ve all done — we say, ‘Hey, let’s serve this next episode commercial-free, made possible by a brand.’ Then we serve your heroic, epic, 30- to 60-second spot, your cinematic spot. At a time when more than 80 percent of our ad-supported members watch for two hours or more, this product will reward viewers and allow your brands to stand out.”
Finally, they will be incorporating sponsors into their live events. T-Mobile and Nespresso, among other brands, have already signed on to sponsor Netflix’s upcoming golf match, The Netflix Cup. This will also be the case for users of the ad-free plans, as their messages will be incorporated into the show.
On Wednesday, the company also announced they will be increasing the prices of some of their plans. For now, the ad-supported option remains at the same value of $6.99 in the US, as well as the standard tier, currently at $15.99. However, they are raising the price of the basic plan (which is no longer available to new subscribers) from $9.99 to $11.99/month in the US, to £7.99/month in the UK, and to €5.99 in France. Similarly, the premium plan is going up to $22.99/month in the US, £17.99 in the UK, and €19.99 monthly in France.
All of this comes after a summer where Netflix saw a huge increase in viewership after the unexpected boost in popularity of Suits, the nine-season legal soap opera that took off in the US and topped Nielsen’s charts for 12 weeks in a row. But that wasn’t a Netflix original, and the streamer has taken note — they have also announced they will be pivoting towards licensing more titles. They also confirmed the news that a new series in the Suits universe is in the works.
And all of this is of course under the looming presence of the actors’ strike, which has stopped production on all of Netflix’s scripted programming. Among other titles, the final season of Stranger Things was unable to kick off production over the summer. Negotiations to end the SAG-AFTRA labor stoppage were halted last week, and Netflix co-CEO Ted Sarandos has been adamant about his disbelief over the actors asking for a levy on every subscriber. But at some point, the two sides will have to go back to the bargaining table and get this thing done once and for all.
The strike is also responsible for Netflix increasing its projections for free cash flow in 2023, from $5 billion to $6.5 billion. The free cash flow in 2022 was $1.6 billion. Also semi-related to the strike, the company says they are listening to its shareholders and will be reconsidering the pay packages of its executives, saying the bonuses will be tied to performance, though they didn’t really expand on it.
Miguel Fernández is a Spanish student that has movies as his second passion in life. His favorite movie of all time is The Lord of the Rings, but he is also a huge Star Wars fan. However, fantasy movies are not his only cup of tea, as authors like Scorsese, Fincher, Kubrick or Hitchcock have been an obsession for him since he started to understand the language of filmmaking. He is that guy who will watch a black and white movie, just because it is in black and white.
