Netflix strategy changes are piling up, but are they working? Here’s the latest on how password-sharing curbs, subscription tier adjustments, and investment in originals are doing.
Password-sharing curbs are working
Despite being unpopular with subscribers, Netflix password-sharing curbs don’t appear to have ignited a stampede of cancelations, far from it. Antenna reports that Netflix saw the highest number of daily sign-ups after introducing the curbs on May 23 since it started tracking them four and a half years ago. There were almost 100,000 daily sign-ups on May 26 and May 27. Average daily sign-ups at the end of May were 74K, 102% higher than the prior 60-day average. Cancelations also increased, but far less than sign-ups.
Many password sharers could be opting for the ad tier
Since its introduction late last year, Netflix has been coy about the number of subscribers to its ad tier. However, it has given guidance that suggests users are embracing it. The company said in May that it had 5 million global monthly active users, that subscribers to the ad tier had more than doubled in the first half of the year, and that the median age of those customers is 34. The company also says that about a quarter of new subscribers select the ad tier in regions where it is available and that ad-tier engagement mirrors ad-free viewers.
Netflix is pushing the ad tier perhaps too hard!
To encourage more people to opt for the ad tier, Netflix is phasing out the cheapest ad-free tier. The $9.99 a-month Basic option provides unlimited 720p HD viewing from one connected TV at a time. The tier is just $3 more than the ad tier and could be a preferred option for all the users impacted by the password-sharing curbs.
Existing Basic tier subscribers can keep their plan when it is phased out, but new subscribers must pay $15.49 a month to watch without ads. The $8.50 monthly premium to watch ad-free is the highest in Netflix’s peer group. Disney+ charges $3 more to watch without ads, and Max and Paramount+ charge $5 more. To be more in line with competitors and fairer to customers, Netflix should consider increasing the price of the Basic tier by $1.50 to $11.49 a month rather than eliminating it.
Viewing is down, or is it up?
According to Next TV’s analysis of Netflix’s Global Top 10 ranking, audiences are down from 2022. Next TV says that between January and May of 2023, viewing was around 330 million weekly streaming hours on shows in the Global Top Ten, down by around 4% from the same period in 2022. The Night Agent is the only show to attract more than 200 million weekly viewing hours this year, with 216.5 million hours in one week at the end of March. In the first week of June 2022, Bridgerton and Stranger Things season four generated over 335 million hours.
Of course, a top ten ranking doesn’t capture complete performance: viewing could be higher this year among shows that didn’t make the top ten. Next TV says that a source familiar with Netflix’s metrics pointed to Nielsen’s The Gauge for evidence that audience engagement was growing, not shrinking. Nielsen says that Netflix’s share of TV time grew slightly, from 7.3% in September 2022 to 7.9% in May 2023. But Nielsen issued a big correction to The Gauge in March, which revealed a large discrepancy rendering the analysis questionable.
Should originals be doing more?
However, new data could support Next TV’s conclusion that top originals from Netflix are not doing as well with audiences as they should be. New Omdia data from PlumResearch shows the proportion of total Netflix viewing time absorbed by the company’s originals. In Q1 2023, viewers in Poland were most engaged with the originals, with almost 40% of time devoted to them, while Japan was the least engaged, with just over 20%. US viewers devoted 35% of Netflix viewing time to the originals.
Do the findings of Omdia suggest that Netflix has a problem with the performance of its originals? Analysis of Netflix content spending by Omdia for 2022 and reported by TBI found that $5.8 billion went toward original productions. Since the company spent $16.7 billion on content in 2022, originals absorbed 35% of spending, which seems in line with the viewing they attract. But perhaps that is too simple an analysis to be meaningful.
