Netflix whips up a record quarterly profit as its unpopular moves pay off
“Nobody Wants This”... Netflix’s password-mooching crackdown and price hikes are working. Yesterday the streaming leader reported that its profit popped 41% from last year, to $2.4B, a quarterly record. Netflix gained 5.1M subscribers last quarter, bringing its global total to nearly 283M. Investors have focused on that metric for ages, but next year the streamer will stop sharing subscriber #s to focus on revenue over membership growth. After the expectation-topping results, the stock spiked 5%.
Still watchin’… the countdown clock on the ad. For a long time, Netflix rejected the idea of having ads in its service. But since introducing its $7/month ad-supported tier a year ago, it seems it has no regrets. Netflix said that last quarter the ad plan accounted for half of sign-ups in countries where it’s available, and ad memberships surged 35% from the previous quarter (FYI: in May, the plan had 40M+ subs). As the cheaper tier prompts sign-ups, Netflix aims to launch it in more countries.
Change of strategy: Netflix is said to be earning more $$/user from its ad tier than from its pricier subs. It’s hiked prices for its premium plans, which could prompt folks to trade down to the ad tier.
If folks find it tolerable, it can be profitable… It turns out a lot of people will put up with ads to save money, especially as streamers continue to raise prices. It’s not just Netflix leaning into ads: Amazon’s Prime Video introduced ads this year (unless subscribers pay an extra $3/month for ad-free streaming). This month Amazon said it’ll pack even more ads into its streamer, suggesting that subscribers didn’t mind it enough to rage-unsub.