Outlook was looking a bit dire for Netflix last year as shares in the company steadily dropped throughout 2022, citing a mass exodus of subscribers for the first time since the streaming market was in its infancy in 2011. Many prophesied that were witnessing a major shake-up in the industry as competitors moved up in the ranks and things started levelling out for the competitive content game.
Perhaps we were wrong.
Netflix recently revealed in its financial report for Q1 2023 that 1.75 million net new subscribers have come on board in the first quarter of the year. Notably, this follows the controversial introduction of Netflix’s lower-cost, ad-supported tier, as well as an uptick of 7.66 million subscribers in the last quarter of 2022. The result is Netflix clearly tearing through on an upward trajectory, ending Q1 2023 with a total global subscriber count of 232.5 million.
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That translates to a 4.9% year-over-year growth in subscribers for Netflix, flipping the script from last year’s pessimistic outlook as the company shifts its focus away from subscription growth and toward revenue.
Breaking the numbers down, it seems paid memberships increased by 100,000 in North America, 640,000 in Europe, the Middle East and Africa, and 1.5 million in the Asia-Pacific region. The only region where subscribers actually declined was Latin America, with numbers falling by 450,000.
Netflix’s experiment puts the focus on advertisements. While the newly introduced Netflix ads is the lowest-cost tier, the boost in subscribers has been enough that the company is now on track to meet its full-year 2023 financial objectives. For Q2 2023, Netflix is forecasting revenue of US$8.2 billion (AU$12.2 billion).
Given the streaming service is about to finally crack down on password sharing, a move that stands to significantly boost revenue, things aren’t looking too bad for the OG.
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So what does this mean for content consumers?
Netflix’s success with advertisement-backed subscriptions likely means we’ll see competitors move to introduce similar options. Given the multitude of streaming services out there now, it makes sense that consumers would want to balance out their household budget by dropping from ad-free subscriptions to these lower-cost tiers in order to justify having access to multiple platforms.
And if that’s true, it’s looking like having a streaming service without advertisements will be a privilege moving forward. Add the potential success of a crackdown on password sharing and it may be that streaming is being pulled into a new, much less convenient era for consumers. Enjoy the current form as it lasts.
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