Analyst: Netflix Ad-Supported Option Expected to Help Up Q4 Subscriber Growth to 10.4 Million

Netflix added an estimated 10.4 million subscribers globally in the fourth quarter, up from a previous estimate of 9.5 million subs, according to new data estimates from Wells Fargo Securities.

Netflix reports fourth-quarter results on Jan. 23.

Analyst Steve Cahall believes Netflix’s aggressive move to stop people freeloading on existing subscribers through unauthorized password sharing could drive ad-supported subscriber growth of around 4.2 million subs, exceeding estimates of 3.9 million subs through the first quarter, ended March 31.

Netflix, which said about 100 million subscribers globally were sharing their passwords with non-paying users, notified members of the situation, offering unauthorized users the option to share an existing standard account for a $7.99 monthly fee, or get their own account. Premium subs can share up to two accounts, each for the aforementioned fee.

While some freeloaders have opted to share an existing account, the majority have opted for Netflix’s $6.99 ad-supported plan.

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Through the second half of the year, Netflix sub growth is projected to cool to 3.8 million from 7.3 million in the previous-year period, according to Wells Fargo. Total 2024 subscriber growth is projected to be around 19.5 million, which is 2.5 million subs below the analyst’s previous estimate of around 22 million. Wall Street is reportedly projecting 2024 sub growth of around 17.5 million.

Ampere: Ad-Supported Option Drove Netflix’s Highest Domestic Subscriber Growth in Two Years

Netflix generated its highest spike in new domestic subscribers in almost two years following the launch of a lower-priced ad-supported option on Nov. 3, 2022, according to new data from Ampere Analysis.

London-based Ampere said the $6.99 tier, which is $3 less than Netflix’s basic ad-free plan, resulted in a 58% increase in new daily subscribers in the three days following the launch compared to the three days before the plan’s debut. Following those 72 hours, interest in the ad-supported tier dropped off to 8% of new Netflix subs — with 36% of those sign-ups being completely new to the service, and 64% switching from ad-free.

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Indeed, 25% of Netflix’s ad-supported subs switched from an ad-free plan, spearheaded by 67% coming from the $9.99 basic plan, 21% from the $15.99 standard plan and 12% from the $19.99 premium plan.

Ampere contends 75% of Netflix’s ad-supported subs also subscribe to at least three other services — led by Prime Video, Disney+ and Hulu.

Netflix has said it doesn’t expect the ad-supported option to have a material impact on subscriber growth until this year.

“Netflix’s [ad-supported] tier has succeeded at drawing back more price-sensitive subscribers who had previously churned,” analyst Mayssa Jamil said in a statement.

The analyst suggests that with increased competition from other ad-supported and ad-free SVOD services, Netflix’s $6.99 AVOD price makes it easier for subs — notably heavy stackers — to subscribe to multiple platforms.

“Some basic [ad-free subs], who are more prone to churning as economic uncertainty and competition increases, have been downgrading to the ad-tier, which will aid customer retention in the long-term,” Jamil said.

Netflix reports Q4 fiscal results today at the close of market trading.

Analyst: Netflix to Add 4 Million Subs in Q1, Topping Projections

Netflix is projected to have added around 4 million subscribers worldwide in the first quarter (ended March 31) — topping company estimates of 2.5 million new subs globally, according to J.P. Morgan analyst Doug Anmuth, who cited data from Apptopia global downloads.

If correct, the additions would send Netflix’s global subscriber base above 226 million — tops for all SVOD services worldwide.

“Based on our discussions with investors, we believe expectations for Q1 net adds are 3 million before Russia [boycott], or 1 million — 2 million post Russia,” Anmuth wrote in an April 7 note.

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The analyst expects Netflix to add around 1 million subs in the current second quarter, ending June 30, which would fall below last year’s gain of 1.54 million subs. Anmuth contends Q2 is traditionally a slow period for Netflix, with potential new subscribers opting instead to travel rather than pay higher subscription fees.

At the same time, the analyst said Netflix is streaming new seasons of “Elite,” “Ozark,” “Stranger Things” and “The Umbrella Academy.” In addition, the second season of “Bridgerton” broke the record for first-week viewing of English-language programming, with more than 252 million hours streamed.

“Despite a muted first half of the year, we are positive on shares overall, and expect stronger subscriber trajectory in the back half [of the year], and beyond with greater distance from both the pandemic, this year’s early price increases, and increased contribution from the Asia-Pacific, Europe, Middle East and Africa regions,” Anmuth wrote.

Netflix reports Q1 fiscal results on April 19.

Analysts Say Netflix Will Miss Q4 Sub Growth Projection

Shares of Netflix dipped slightly Jan. 6 after two Wall Street analysts suggested the streaming behemoth could miss its fourth-quarter (ended Dec. 31, 2021) subscriber growth projection.

In a Jan. 6 note, J.P. Morgan analyst Doug Anmuth estimated the streamer will have added 6.25 million net new subs globally in the quarter when it reports financial results on Jan. 20. Netflix is projecting 8.5 million new subs added — a number that exceeds most of its competitors.

With the streaming pioneer firing on all cylinders, there are few metrics to critique the service on except subscriber growth — an easy target as the subscription VOD market reaches saturation in the United States.

WarnerMedia contends its HBO Max streaming platform was the top-growing service in 2021, ending the year with more than 73 million combined HBO and Max subs since launching in May 2020.

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The tally still trails Netflix’s market-leading global sub count of 213.5 million at the end of Q3 (Sept. 30, 2021), followed by Amazon Prime Video with 175 million, and Disney+ with 118 million.

“We believe fourth-quarter [subscriber] additions were lumpy as Netflix started the quarter with significant spike and buzz around ‘Squid Game,’ which was released in late September,” Anmuth wrote. “Download growth then slowed and ultimately declined into early December before picking up.”

Stifel analyst Scott Devitt also has sub growth concerns, compounded by what he claims were weaker Netflix app engagements in November and ongoing service price cuts in India — a market rival Disney+ dominates after acquiring local streaming service Hotstar in the 20th Century Fox acquisition.

Both analysts maintain buy ratings on the Netflix stock, while each trimmed the stock’s price targets, respectively. Indeed, Devitt reduced his sub growth projection from 10.1 million to 8.6 million — which exceeds Netflix’s estimate.

“Despite these concerns we believe the company executed well on its strategy [in the fourth quarter] releasing a slew of high-profile original content and making solid headway on its video games and visual effects initiatives,” Devitt wrote in a note.

Despite Stumble, Disney+ is the Top-Growing Streaming Service, JustWatch Says

While the fourth-quarter (ended Oct. 2) subscriber growth slowdown at Disney+ made headlines, the 2-year-old SVOD service remains the top-growing platform — ahead of competitors HBO Max, NBCUniversal’s Peacock, Paramount+, Hulu, Amazon Prime Video and Netflix.

New data from JustWatch, which tracks more than 20 million users per month across 54 countries, found that Disney+ was No. 1 in subscriber growth across the majority of its 64 operating markets. The platform ended the quarter with 118.1 million subs, up 60% from the previous-year period, but still trailing SVOD leader Netflix’s 214 million subs across 190 countries.

Indeed, Disney’s addition of 4.4 million subs in the most-recent fiscal period rivaled Netflix. But the streamer’s Indian asset, Hotstar, lost 2.4 million subs, largely due to the process of initiating subscriber renewals and the timing of the Indian Premier League cricket season. India accounts for 37% of Disney+ total subscribers.

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With Disney+ celebrating its two-year anniversary Nov. 12 in a companywide media event, CEO Bob Chapek is hardly worrying about the Q4 slowdown, reiterating the company is not focused on quarter-by-quarter subscriber results.

Instead, Chapek reminded that the service is now available throughout Japan and launching tomorrow in South Korea and Taiwan, with Hong Kong bowing on Nov. 16. In 2022, Disney+ will expand across more than 50 additional countries, including in Central and Eastern Europe, the Middle East and South Africa.

“Our goal is to more than double the number of countries we are currently in to over 160 by fiscal-year ’23,” Chapek said. “We are enormously proud of all that we’ve accomplished with the service in just the first 2 years. It has exceeded our wildest expectations, and we are so excited for what’s to come.”

Disney+ Sub Growth Cools, Just 2 Million Subs Added in Q4

Disney Nov. 10 disclosed that its Disney+ subscription streaming video platform added just 2 million subscribers in the fourth quarter (ended Oct. 2). The platform ended the fiscal year with 118.1 million subs, which was up 60% from 73.7 million subs in the previous-year period.

The subscriber growth slowdown was expected after CEO Bob Chapek in September warned the service would face challenges getting existing Indian subs to renew without the presence of Indian Premier League professional cricket, among other challenges. India represents 37% of all Disney+ subs following Disney’s acquisition of the Hotstar streaming platform from Fox.

Indeed, Hotstar lost about 2.5 million subs in the quarter. The overall sub gain was less than half of the 4.4 million global subs Netflix added during the same time period.

Disney ended the fiscal year with 179 million subscribers when including ESPN+ (17.1 million), Hulu and online TV platform Hulu + Live TV (43.1 million).

“In the past fiscal year alone, we have grown [direct-to-consumer] portfolio by 48%,” Chapek said on the fiscal call, adding that Disney remains focused on the long-term goals for the DTC segment versus quarter-by-quarter metrics. The strategy helps Disney avoid focusing on the Q4 Disney+ sub growth decline.

Chapek expects Disney+ sub growth to grow significantly in Q3  and Q4 next year as the service is made available in 160 countries, and the platform debuts myriad new movies and episodic programming.

“We’re confident we are on the right trajectory to achieve the guidance [230 million to 260 million Disney+ subs by 2024] we disclosed at last year’s investor day,” he said, including the platform achieving profitability.

Netflix Bear Analyst Eyes 15 Million Q2 Subscriber Growth

Wedbush Securities media analyst Michael Pachter has long rebuffed conventional wisdom when it comes to Netflix. The Los Angeles-based analyst steadfastly considers the streaming behemoth’s excessive use of free cash an underling weakness in the Netflix story.

Free cash flow is often considered an important measurement since it outlines how effective a company is at generating enough cash after funding operations and capital expenditures to pay investors via dividends and share buybacks.

Netflix has consistently been in the red with available free cash, with Pachter projecting $1 billion negative FCF for the SVOD pioneer in the 2020 fiscal year.

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But following a July 10-12 survey panel of 1,315 Americans on their current streaming and cable subscriptions, Pachter contends Netflix’s FCF situation is improving — albeit in the short term.

Michael Pachter

The analyst found that 50% of respondents cite Netflix as their favorite service, with 8% signing up for the first time in the past 90 days — a similar percentage of newbies resisted in Pachter’s previous survey in March.

“[It] suggests continued robust subscription growth,” Pachter wrote in a July 14 note.

Indeed, the analyst believes Netflix could report net sub additions of 15 million worldwide — up from Pachter’s estimated 7.9 million net sub additions. More importantly, the outsized sub growth could see a $250 million lift to FCF for the year.

“This would improve our estimated [Netflix FCF] loss of $1 billion (in-line with guidance for a $1 billion loss or better) to $750 million,” Pachter wrote, who added the improved economics portend other issues.

“We think the likely giant spike in new subscribers increases pressure on Netflix for retention.,” he wrote. “More consumption of content suggests even greater need to replace content with something new, and we expect spending and negative free cash flow to return to 2019 levels in 2021.”

Netflix reports second-quarter fiscal results July 16.

Netflix Q1 Results: Day of Reckoning or Rich Get Richer?

All eyes on Wall Street next week will be focused on Netflix’s first-quarter financial results, which will be released at market close on April 21. At a time of uncertainty, Netflix’s subscriber growth will either validate the market’s enhanced fawning over the SVOD behemoth’s stock or bring it crashing down to earth, the harsh economic reality of the coronavirus even on the perceived virus-proof over-the-top video ecosystem.

Wall Street analysts project Netflix will add upwards of nine million subscribers worldwide, significantly more than the streaming pioneer’s seven million estimate. Scuttlebutt suggests that with shelter-in-place mandates legally enforceable throughout much of Western Europe, people have turned to video streaming in greater numbers for entertainment than before the pandemic.

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Netflix shrewdly took the opportunity to bow true-crime documentary “Tiger King,” an immediate hit with social media water cooler banter, while boasting catalog can’t misses such as “The Office,” among others. The result: a spike in subscriber growth, according to streaming analytics firm Antenna.

“We believe the unfortunate COVID-19 situation is cementing Netflix’s global dominance, partly driven by the incremental content spend that is enabled by their massive and growing subscriber base,” Jeffrey Wlodarczak, analyst with Pivotal Research, wrote in a separate note.

Netflix ended 2019 with 167 million paid subscribers.

Indeed, the echo chamber reverberated surrounding Netflix’s strong position during the pandemic, to point the service’s stock topped Disney, among other media giants.

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Even longtime Netflix bear Michael Pachter, with Wedbush Securities in Los Angeles, expects “moderate upside” to subscriber growth and revenue as social distancing guidelines around the world have “clearly driven” streaming usage, dampened churn and drove incremental sign-ups.

That said, Pachter cautioned that the “most meaningful” stay-at-home mandates globally only began in late February through mid March.

“The timing of COVID-19-related usage and sign-ups late in the quarter, combined with an existing high degree of penetration for Netflix’s domestic addressable market, suggests relatively tempered upside in our view,” Pachter wrote in a note.

Netflix Projected to Top Q1 Subscriber Growth Estimate

Netflix reports first-quarter (ended March 31) financial results on April 21, and its subscriber growth during the ongoing coronavirus pandemic is expected to exceed the SVOD pioneer’s own estimates.

That, according to new data from Wall Street firm Sun Trust Robinson Humphrey. The firm says a combination of strong content (i.e. current hit “Tiger King”) and worldwide global appeal/deference to localized content should push total sub growth upwards of 9.5 million compared to Netflix’s projection of 7 million subs.

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Netflix ended 2019 with 167 million subs worldwide, including 67 million in North America.

Not surprisingly, Sun Trust Robinson Humphrey has a “buy” rating on Netflix’s stock, which is up 2.9% in early April 6 trading.

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Netflix Just Misses Q3 Subscriber Growth Estimates; Shares Up Regardless

Netflix Oct. 16 said it added 6.77 million subscribers in the third quarter (ended Sept. 30). The tally was 230,000 fewer than the subscription streaming video pioneer had projected — but up 700,000 subs from the previous-year period.

In the U.S., paid net sub adds totaled 500,000, down from 800,000 forecast and 998,000 a year earlier. It ended the period with 60.6 million domestic subs compared to 56.9 million in the previous-year period.

The SVOD behemoth has added 2.1 million domestic subs through nine months of the fiscal year compared with 4.1 million in the first nine months of 2018.

Netflix ended the fiscal period with 158.33 million subs worldwide compared to 130.42 million subs during the previous-year period.

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In the shareholder letter, CEO Reed Hastings and CFO Spencer Neumann tried sugarcoating the sub growth miss as a result of management’s desire to “strive for accuracy” in fiscal disclosures.

“In Q3, our guidance forecast was our most accurate in recent history,” they wrote.

Netflix cited the recent domestic price hike for undermining sub retention from pre-price-change levels in the U.S.

The Los Gatos, Calif.-based service has revised downward global Q4 sub growth estimates to 7.6 million from 8.8 million a year ago, with 600,000 in the U.S. and 7 million for the international segment.

The projection suggests Netflix would add 26.7 million subs in 2019, down from 28.6 million last year.

Again, management alluded to “less precision” in its ability to forecast the impact of the current Q4 content slate, which consists of several new big IP launches (as opposed to returning seasons), the elevated sub churn in response to price changes, and forthcoming competition, i.e. Apple TV+, Disney+.

“While the new competitors have some great titles (especially catalog titles), none have the variety, diversity and quality of new original programming that we are producing around the world,” Hastings & Neumann wrote.

Indeed, the service said revenue growth has accelerated as domestic ARPU increased 16.5% from the previous-year period.

“With more revenue, we’ll continue to invest to improve our service to further strengthen our value proposition,” they wrote. “Our long term outlook on our business is unchanged.”

Finally, Netflix’s legacy by-mail disc rental service ended the period with more than 2.2 million subs, down from 2.8 million last year. The segment continues to generate substantial profits with more than $44 million added to the bottom line. That was down from contribution income of $51.6 million last year.

Wall Street welcomed Netflix’s increase profit (up 65% to $665 million) and relatively flat sub additions. Shares increased more than 8% in aftermarket trading.