SAN FRANCISCO – Netflix Inc. (NFLX.O) is set to announce its first-quarter results, and investors are keen to see if the company’s recent price cuts and the launch of an ad-supported plan have helped attract more subscribers and retained existing ones. The company had faced a slowdown in subscriber growth, losing 200,000 subscribers in the year-ago quarter. However, it returned to growth in the second half of 2022. In the March quarter, the company is expected to add a net 2.07 million subscribers, compared to a drop of 200,000 subscribers a year earlier. Netflix itself has stopped providing forecasts for the metric.
Netflix is facing stiff competition from streaming services like Walt Disney Co (DIS.N), Amazon.com Inc (AMZN.O), and Warner Bros Discovery (WBD.O). Last year, Amazon knocked Netflix off the top spot in the United States, according to consulting firm Parks Associate. Additionally, Warner Bros recently launched a new streaming service called “Max” on May 23, combining HBO Max’s scripted entertainment with Discovery’s reality shows.
To squeeze out revenue from the 100 million people who use the service without paying, Netflix has cracked down on password-sharing in some countries. This move may prompt some people to drop the service as a knee-jerk reaction, but analysts believe that they are likely to come back to it. The crackdown will have a “more meaningful impact” in the June quarter, and Netflix could gain more than 10 million new subscribers as it converts free users to paid ones, according to Rosenblatt Securities analyst Barton Crockett.
Competition Vs. Innovation
Netflix has also introduced an ad-supported plan in 12 countries for RM30.91 per month after resisting commercials for years. This move may help the company attract more subscribers and generate additional revenue. Disney’s Hulu and Disney+, and HBO Max already have ad-supported options.
According to social media analytics firm Antenna, “the role of advertising continues to grow in importance to premium (streaming services) as a part of their profitable growth strategies. In 2020, only one in five new sign-ups were to ad-supported plans; last year, it was nearly one in three.”
In conclusion, Netflix’s first-quarter results will be closely watched by investors, particularly to see if the recent price cuts and the launch of the ad-supported plan have helped attract and retain subscribers. With stiff competition in the streaming industry, Netflix will have to continue innovating to stay ahead of its rivals. The crackdown on password-sharing and the introduction of an ad-supported plan could be key to the company’s growth strategy in the coming months. – Reuters