Netflix’s (NASDAQ:NFLX) efforts to crack down on password-sharing have likely contributed to a surge in subscribers, with an estimated 6 million new additions in the third quarter. As the streaming giant prepares to report its earnings, it is expected to set the stage for potential price increases.
Netflix, currently the only profitable major streaming service, has refrained from raising ad-free subscription prices this year, instead focusing on limiting password-sharing outside of households. This strategy was designed to tap into the vast number of viewers, exceeding 100 million, who use its service without subscribing. As a result, Netflix is now regarded as a utility in many markets, with the challenge being how a maturing company can continue to find growth opportunities.
Reports suggest that Netflix might consider price hikes following the conclusion of the Hollywood actors’ strike, which had disrupted the entertainment industry. However, Netflix has weathered the strike effectively due to its extensive international presence and strong content lineup.
Netflix’s ad-supported plan, launched last year, had a relatively slow start, but analysts anticipate that Netflix will increase the prices of its ad-free options in the near future to encourage more subscribers to opt for the ad-supported tier, which generates higher revenue per user. So far, most subscribers who joined Netflix after the password crackdown have chosen ad-free plans. The ad-supported plan is priced at $6.99 per month, while ad-free plans start at $15.49.
Analyst Ross Benes from Insider Intelligence anticipates that Netflix will likely double its ad-supported viewership next year by implementing these strategies. The ad-supported tier is projected to generate approximately $188.1 million in revenue in the third quarter, with an estimated 2.8 million new subscribers, according to Visible Alpha estimates.
Overall, Wall Street expects Netflix to report its strongest quarterly subscriber additions for the year. Revenue in the third quarter is estimated to have risen by 7.7% to reach $8.54 billion, marking the fastest growth in five quarters, driven by strong programming that included popular series like “Sex Education” and “Virgin River.”
As Netflix continues to evolve its strategies and pricing models, the streaming landscape is likely to witness further changes and developments.
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