Netflix (NFLX.O) is gearing up to unveil its strategy for sustaining subscriber growth as it prepares to release its earnings report on Thursday. The spotlight will be on Netflix's approach following two quarters of significant increases, particularly after its crackdown on password sharing, which analysts anticipate will moderate.
Since mid-2023, Netflix has experienced robust growth, adding approximately 22 million subscribers worldwide after implementing measures to curb password sharing. However, experts suggest that the momentum from this initiative is likely to wane in the coming months, prompting attention to shift towards other strategies, notably its ad-supported tier and expanding sports offerings.
Here are five key points to watch for in Netflix's upcoming earnings report:
1. Subscription Growth in Q1: Analysts project Netflix to have gained 5 million subscribers in the first quarter of 2024, a notable increase from the previous year but a deceleration compared to the preceding quarters. The popularity of original series like "Fool Me Once" and "Griselda," along with licensed content such as "Grey's Anatomy," have contributed to its appeal.
2. Future of Password-Sharing Crackdown: Netflix's successful crackdown on password sharing, initiated globally in May last year, has influenced competitors like Walt Disney (DIS.N) to follow suit. However, there are concerns about saturation in key markets like the United States, while opportunities for growth remain in international markets like India.
3. Ad-Supported Tier Expansion: Netflix has surpassed 23 million monthly subscribers for its ad-supported tier, representing 30% of all new sign-ups across 12 countries. The ad-supported plan, priced at $6.99 per month in the U.S., is expected to gain traction, particularly following recent price hikes for commercial-free plans.
4. Content Investment: With plans to invest up to $17 billion in content this year, Netflix aims to maintain its competitive edge. Its consistent investment in content has helped attract subscribers, especially as competitors scale back investments to boost profitability.
5. Venturing into Sports Entertainment: Following a high-profile deal with World Wrestling Entertainment (WWE), Netflix is signaling its commitment to sports entertainment. This move allows Netflix to capitalize on the appeal of sports content without the exorbitant costs associated with traditional sports rights.
Investors are keen to see how Netflix navigates these areas, particularly its foray into sports entertainment and the potential impact on subscriber engagement and revenue growth.