It’s the story of the glass half full or half empty. Netflix now has 232.5 million subscribers, a gain of 1.75 million followers. Its turnover reached 8.16 billion dollars (in line with forecasts). We could therefore say that the streaming giant is starting the year 2023 rather well.
Not quite. Because net profit ($1.3 billion) was down 18% year-on-year. “These rather lukewarm results do not prove that the company will be able to revitalize its activities with advertising and paid password sharing” says Insider Intelligence analyst Paul Verda au Figaro.
The company is aware of this. “Expected user and revenue growth will come in Q3 rather than Q2” she said after giving an overview of her strategy for the year 2023.
Bye bye password sharing, focus on advertising
This strategy will be deployed from this second quarter with several radical measures. First, the company announced the end of its historic DVD rental service by mail launched 25 years ago. “Our goal has always been to provide the best to our membersexplains Netflix, but it has become very complicated with the decrease in this activity”. The end of DVD rental will therefore affect more than a million Americans who are still fans of this service and will above all allow Netflix to reduce its costs.
By this summer, the end of account sharing should also be deployed worldwide. Announced for early 2023 then March 2023, this new rule is already applied in some countries such as Spain.
But a large-scale deployment looks more complicated than expected. If all goes well, the end of account sharing will take effect worldwide this summer. If the company is aware that this measure will occasionally increase the number of cancellations, it intends to rely on its offer with advertising to compensate. In January, Netflix CFO Spencer Neumann estimated that advertising would quickly generate 10% of the company’s revenue and “much more afterwards”.
A feeling shared by the firm Insider Intelligence which believes that Netflix will end up generating $770 million in advertising revenue in the United States alone this year and more than a billion in 2024.
To push its offer with advertising, Netflix announced that the content would now be broadcast in Full HD, at no additional cost. A response to the Disney+ offer with advertising? Without a doubt. Formerly the undisputed master of SVOD, Netflix is now being jostled by increasingly aggressive competition.
