No matter what Wall Street bets on the company’s near-term strategy, what streamer reports for third-quarter earnings
Netflix’s ability to launch an ad-based service so quickly has caught the attention of investors, who are concerned that Disney will dominate the streaming market with its upcoming ad-supported tier. Shares of Netflix have jumped 16% since unveiling its ad tier plans last Thursday, and hit a high in pre-market trading on Tuesday.
Remember, Hastings almost casually admitted about six months ago that he might be ready to introduce an ad level as he’s trying to figure out “in the next year or two.” Management had to act more quickly once Netflix stock, which once traded close to $700 a share, dropped to less than $200 a year after nearly 1 million subscribers pulled out of service this year.
“Given investor attention to upcoming advertising levels and payment sharing efforts, these new offerings may partially offset any weakness in the third quarter,” said John Blackledge, analyst at Cowen & Co. “They’re focused on the fast-forward opportunity as Netflix rolls out ad tier and password-sharing efforts, while also working through a pandemic pull-forward in demand.”
company estimated to report that earnings Per share fell more than a third year-over-year to $2.12 per share, in line with the average analyst consensus. Revenue is projected to increase approximately 5% to $7.8 billion. If Netflix lives up to these previously low expectations, it would mark the streamer’s second earnings drop in the past three quarters and its slowest revenue growth in more than six years.
But actually achieving financial goals has little to do with the way Wall Street interprets Hollywood studios, who have bet the farm on their streaming ambitions. In the eyes of investors, the win beat EPS and revenue estimates. Then it all became about the number of subscribers that Netflix and rivals added over the course of a quarter.
Now, it’s about commercials, commercials. No Subscriber.
Unveiled last week, its “Basic with Ads” service will launch in the US on November 3 for $6.99 a month, a similar price point that will be available in Australia, Brazil, Canada, France, Germany, Italy, Japan, Korea, Mexico. is being started. , Spain and UK
Existing members and those with existing plans will not be affected, lest they decide to switch to the tier. The ad-level will complement the streamer’s ad-free Basic, Standard, and Premium plans, which cost $9.99, $15.99, and $19.99, respectively. There will be an average of four to five minutes of commercials per hour, each of 15 or 40 seconds in duration.
Analysts have long been raving about who will be the “Netflix killer,” set to hit streaming exclusively in the coming weeks with big hits like “Top Gun: Maverick” hitting the Paramount+ ramp and Warner Bros. CEO of David Zaslav prepares for merger. Discovery+’s reality programming with HBO Max.
But Netflix’s misfortunes have grown since January, with everyone from hedge funds to mom-and-pop investors wondering who can compete with Disney+. Streamer is launching its own ad tier in December at $7.99 per month, but customers who don’t have the patience for ads can pay $3 more per month without ads.
The big danger from CEO Bob Chapek’s studio is that management already knows about the advertising business of the three major enterprises. ESPN+ and Hulu all offer streaming patrons an option for ad tiers, and the media giant is savvy about advertising by running broadcast networks such as ABC and several cable channels.
“Advertising is key to accelerating revenue and driving greater profitability,” said JPMorgan Chase analyst Doug Anmuth. “The Netflix narrative has shifted from slow or no subscription growth at current business to advertising and paid sharing.”
That’s another big issue that Hastings and Sarandos expect analysts to address: freelayers. The company has estimated that passwords are being shared in violation of its rules with more than 100 million non-paying families worldwide, and about a third of them come from North America alone.
Netflix on Monday unveiled the launch of Profile Transfer, a feature that gives anyone on an existing subscription the ability to transfer their profile to a new account while preserving all their personal recommendations, viewing history and other settings. Is. And, with a $6.99 ad-tier, it could deal those users with getting a jail-free card.
If each of those 100 million non-payers decided to downsize to one ad-tier subscription, it would generate about $700 million in annual revenue. It may be pie in the sky, but Netflix’s upper management needs to acquire some of that to maintain its title as the biggest streaming service on the planet.
“People move on. Families grow. Relationships end. But throughout these life changes, your Netflix experience should stay the same.” Written by Timmy Koztin, said the company’s product manager of product innovation. “No matter what’s going on, let your Netflix profile stand still in a life full of changes so you can sit back, relax, and continue watching from where you left off.”
That’s right, Netflix is your friend for a lifetime. Cold.
