Last year, things got shaky for Netflix when the company reported its first subscriber loss in years, which caused the stock price to plummet. In the aftermath, Netflix began looking for new ways to not only maximize profit from current customers but to maximize subscriber growth as well. The company rolled out a password crackdown earlier this year, which appears to be working. Netflix reported adding 9 million new subscribers in the most recent quarter.
The other big change was the addition of an ad-supported tier. Again, all signs point to that working out for Netflix as well. The company resisted putting ads on the platform for years but the pressures of increased competition and slowing subscriber growth forced the issue. Speaking to the ad side of the business in the subscriber letter, Netflix said the following:
“Ad dollars follow eyeballs and more and more TV viewing is shifting from linear to streaming — we’re a leader in streaming engagement, and the engagement of our ad tier members is strong. While we have much work to do to build out this business, we’re making good progress and laying the foundation for what we believe should be a multi-billion dollar revenue stream over time. Our immediate priority is building our ad membership so that Netflix becomes an essential buy for advertisers, which is key for advertising to become material to our business.”
Unfortunately for consumers, as cord-cutting continues to accelerate, streamers are going to get more aggressive with these price increases. Disney+ and Hulu recently announced price hikes, and other streamers are expected to follow suit as well. This is what the streaming-dominated landscape is going to look like for the foreseeable future, it seems.