Nearly a fifth of West Europe Netflix users to be on ad tier by 2027
Details
Editor
| 26 August 2022
A study from Ampere Analysis has highlighted strong prospects in Western Europe for the imminent ad-supported tier of subscription video-on-demand service Netflix which is set to generate annual revenues of $1.9 billion from advertising 2027, outstripping those from the US.
Ampere Netflix ad tier 26Aug2022
According to Ampere’s report, 19.3% of Netflix users in W Europe will view content via the ad tier by 2027, most of them from the existing customer base. The ad tier will stabilise this saturated region. Ampere estimates a subscriber growth (with ad tier) in Western Europe of 1.8% above a subscription-only model. A relatively strong increase in the value of advertising-supported customers will boost the overall revenue gain.

Globally, Netflix is set to earn $5.5 billion in annual advertising income by 2027, boosted to $8.5 billion a year by ad tier subscription fees. The launch will see Netflix earn $2.2 billion more by 2027 than it would with purely a subscription-only model, driven by an ARPU uplift combined with a modest increase in the overall subscriber base. Ampere estimates that total customers will be 3.2% higher than without an ad tier.

In all the new study found that including Canada, North American ad revenues will reach $2.1 billion and that an additional $841 million will be earned from ad tier subscription fees in Western Europe compared with $1 billion in North America.

Western European viewers have the highest price sensitivity among Netflix’s customers which combined with relatively high advertising rates on a cost per thousand (CPM) basis makes advertising in the region a strong opportunity for the streaming giant. Ampere also noted that very strong advertising rates for streaming in Western Europe will contribute to a significant uplift in the value per customer for those taking the ad tier.

Although the overall boost to subscriptions is predicted to be modest in the region, this increased customer value will drive Western Europe to exceed the value of the US market by 2027. Ampere Analysis also believes that Netflix in Western Europe will experience an increase in average revenue per user (ARPU) as a result of the launch of the ad tier. Specifically, the firm predicts that 2023 ARPU will be 4.9% higher than without it, rising to 8.6% higher by 2027.