Will Netflix price cuts, ad-supported plan help add more users?

[April 17, 2023]  By Yuvraj Malik

(Reuters) - Netflix Inc is expected to report that it added some 2 million subscribers in the first quarter and investors will scrutinize whether recent price cuts and the launch of an ad-supported plan are tempting people to subscribe and stay on.

The company, which lost 200,000 subscribers in the year-ago quarter, returned to subscriber growth in the second half of 2022 but its pace of additions has slowed dramatically, forcing it to think of ways to squeeze out revenue from the 100 million people who use the service without paying for it.

To do that, the streaming giant has cracked down in some countries on password-sharing, or streaming Netflix by non-members who don't belong to the same household, which may prompt people to drop the service as a knee-jerk reaction but they are likely to come back to it, analysts said.

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, Rosenblatt Securities analyst Barton Crockett said.

Netflix is expected to add 3.43 million subscribers in the April-June period, according to 16 analysts polled by Refinitiv, compared with 970,000 subscriber losses in the year-ago quarter.

In the quarter ended March 31, the company is expected to have added a net 2.07 million subscribers, versus a drop of 200,000 subscribers a year earlier. Netflix itself has stopped giving forecasts for the metric.

Netflix is set to post first-quarter quarter revenue growth of nearly 4%, according to Refinitiv, marking its second-slowest growth ever after a nearly 2% rise in the December quarter.

Smartphone with Netflix logo is seen in front of a descending stock graph in this illustration taken April 19, 2022. REUTERS/Dado Ruvic/Illustration

The March quarter lacked major releases with non-English shows such as Korean revenge drama "The Glory" and the third season of Mexican drama "La Reina del Sur" doing well, according to Jefferies.

Netflix has faced strong competition from Walt Disney Co, Amazon.com Inc and Warner Bros Discovery. 

Amazon knocked Netflix off the top spot in the United States last year, according to consulting firm Parks Associate.

Warner Bros said on Wednesday it will launch a new streaming service on May 23 called "Max", combining HBO Max's scripted entertainment with Discovery's reality shows.

Netflix in November introduced a streaming plan with advertising for $6.99 per month in 12 countries, after resisting commercials for years. Disney's Hulu and Disney+, and HBO Max already have ad-supported options.

"The role of advertising continues to grow in importance to premium (streaming services) as a part of their profitable growth strategies," social media analytics firm Antenna said in a note last month.

"In 2020, only one in five new sign-ups were to ad-supported plans; last year, it was nearly one in three."

(Reporting by Yuvraj Malik in Bengaluru; Editing by Sayantani Ghosh and Shounak Dasgupta)

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