Netflix breaks stagnant revenue streak; ad-tier performs ‘above initial expectations’

Streaming giant Netflix has continued its growth trajectory in subscription, as the business reported 232.5 million paid memberships in Q1 2023, an increase of 4.9% year-on-year (YoY).

However, different from the previous quarter, its revenue also increased to US$8.16 billion (A$12.15 billion) in the three months ended 31 March – a 3.7% increase YoY.

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The net income of the period was US$1.3 billion (A$1.93 billion), with an operating margin of 21%.

In APAC, the quarterly revenue came to US$934 million (A$1.39 billion), with an additional 1.46 million paid memberships added into the region, compared to 1.8 million in Q4.

Netflix said the engagement on its ad tier has been “above our initial expectations” but that there has been little switching from standard and premium plans to ad-supported tiers.

Meanwhile, the ad-supported plan now has an average of around 95% of content parity globally by viewing with the ads-free plan.

Microsoft is Netflix’s global technology and sales partner and powers its ad-supported tier. However, there have been some confusion from advertisers around the specificities of their offering, especially in the early stage.

Digiday reported last December that Netflix had given money back to advertisers due to a shortfall in promised viewership targets.

Nevertheless, Netflix flagged in the earnings that it is launching a programmatic private marketplace to enable more buying options for Netflix ad inventory using Microsoft’s sales platform.

The wider launch of paid sharing and password crackdown, meanwhile, has been postponed to the second quarter to leave room for fine-tuning the existing plan. The company believed that in the long term this would increase its revenue base.

The platform also announced that it would close down its DVD rental service on 29 September 2023.

Looking ahead, the company forecasted revenue is US$8.2 billion (A$12.21 billion) for Q2, with an operating income of US$1.6 billion (A$2.38 billion) and a margin of 19%.

Netflix’s share price closed at US$323.12 (A$481.18) on 19 April. Its current market capitalisation is US$143.90 billion (A$214.32 billion).


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