Netflix subscriber additions likely slowed, growth strategy in focus
By Harshita Mary Varghese
Oct 15 (Reuters) -Netflix could report its slowest subscriber additions in six quarters on Thursday as gains from a password-sharing crackdown ease, with investors looking for signs its nascent ad revenue business is accelerating.
The streaming giant likely added4 million subscribers in the July-September period, according to analysts' estimates compiled by LSEG. Netflix originals such as "The Accident" and "The Perfect Couple" were among the top streamed titles in the U.S.during the quarter, Nielsen data showed.
As the pace of sign-ups slows, Netflix is trying to shift investor attention towards other performance measures including revenue growth and margins. It will stop reporting subscriber data from 2025.
"Their focus is to continue to grow subscribers at a healthy clip while also leveraging their scale, ability to raise prices and increase advertising dollars," said Pivotal Research analyst Jeff Wlodarczak.
The company's ad-supported planhas been growing but Netflix does not offer details on the tier'sfinancial performance and does not expect it to become a primary driver of growth until 2026.
This has raised some concerns about its growth trajectory.
"They're making less than a billion dollars a year in the U.S. on advertising, saying that doesn't make them look good," eMarketer television and streaming analyst Ross Benes said.
Some analysts have said the company needs to raise prices and phase out more of its ad free plans to nudge customers towards the tier with commercials as it usually brings in morerevenue per user.
The companysaid in July last year it would stop offering the $9.99 a month basic plan without commercials to new users in the U.S. and theUK, andphase it out for existing subscribers.
Netflix charges $6.99 per month in the U.S. for the ad tier, while its standard plan without commercials is priced at $15.49 a month.
It has not raised the price of its standard plan since early 2022, while its ad-supported tier has been priced the same since its launch in late 2022.
The company, which operates in more than 190 countries, is expected to report ad revenue of $242.7 million in the third quarter, according to the average of estimates fromthree analysts compiled by LSEG. Overall revenue is expected to grow 14.3%, a slightly slower pace than the previous three months, to $9.76 billion.
To attract more advertisers, the streamer is focusing on live events including sports. Netflix will air the highly anticipated Jake Paul vs. Mike Tyson boxing fight in November, followed by its first NFL games in December.
The second season of hit South Korean drama series "Squid Game", expected to release in December, couldhelp the company draw subscribers in the last quarter of the year.
Netflix stock has risen 12.4% since it reported second-quarter results in July, compared with a5% rise in the S&P 500 index .SPX.
Netflix stock outperforms rivals, S&P 500 index https://reut.rs/3UwgDFR
Netflix's gains from password-sharing crackdown taper off https://tmsnrt.rs/46uvEf1
Reporting by Harshita Mary Varghese in Bengaluru; Editing by Aditya Soni and Devika Syamnath
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