Netflix is expected to report its slowest subscriber growth in the last one and a half years, as the initial surge from its password-sharing crackdown fades.
When Netflix first launched its crackdown on password sharing, it saw a significant boost in new subscribers, as many people who had previously been sharing accounts decided to sign up for their own subscriptions.
This initial surge in subscribers was a positive result for Netflix, as it brought in new paying users who were previously taking advantage of shared accounts.
However, as time has passed, the impact of this crackdown has diminished. As a result, the rate of subscriber growth has slowed down significantly.
According to reports, Netflix added around 4 million subscribers in the third quarter of 2024. This marks a significant decline compared to previous quarters, signalling that the surge from cracking down on shared accounts is fading.
Popular titles like “The Accident” and “The Perfect Couple” contributed to retaining subscribers but weren’t enough to maintain the rapid growth seen earlier.
This slowdown in growth means that Netflix is no longer benefiting as much from the crackdown as it did in the earlier phases. Investors are now focusing on Netflix’s ability to leverage its advertising business for future growth.
Backstory
Nairametrics reported that Netflix added 8.05 million new paid subscribers in the second quarter of 2024.
- This growth significantly surpassed projected estimates of 5.2 million by 54%, bringing Netflix’s global subscriber base to an impressive 277.65 million and reinforcing its dominance in the streaming market.
- While this figure is considerably lower than the 9.33 million new subscribers recorded in the first quarter of 2024, it still indicates a strong performance relative to expectations.
- For Q2, Netflix reported $9.5 billion in revenue and $4.88 in earnings per share, which aligns with consensus estimates and previous guidance.
This solid performance follows the company’s highest-ever earnings recorded in the first quarter, showcasing its resilience and ability to attract new subscribers amid a competitive landscape.
The shift in strategy towards ad revenue
As the rate of new sign-ups decreases, Netflix is pivoting to other performance measures, such as revenue growth and profit margins, to assure investors.
- One of the key areas of focus is its ad-supported subscription plan, which has been expanding steadily.
- However, Netflix has not yet disclosed the financial performance of this tier and doesn’t expect advertising to become a primary source of growth until 2026.
Jeff Wlodarczak, an analyst at Pivotal Research, explained, “Their focus is to continue growing subscribers at a healthy rate while using their large scale to raise prices and increase advertising revenue.”
Subscription prices
- Netflix has raised its subscription prices in Nigeria, with the Premium Plan now costing N7,000 per month, a significant increase of 40% from the previous price of N5,000.
- This marks the second price adjustment made by the platform in just three months, following a previous increase implemented in April 2024.
- As detailed on the company’s website, the Standard Plan, which is popular among Nigerian subscribers for its HD quality and multi-screen viewing options, has also seen a price hike.
- The subscription fee for the Standard Plan has risen from N4,000 to N5,500, reflecting a 37.5% increase.
