Ampere Analysis outlines reasons for very strong Netflix Q3
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John Moulding
| 20 October 2023
1 Ampere Analysis outlines reasons for very strong Netflix Q3 BACK UP

Ampere Analysis has given its view on the latest Netflix financials, observing the strongest Q3 for Netflix ever in terms of net subscriber additions. The account-sharing countermeasures have been the biggest driver for growth.

Richard Broughton, Executive Director & Co-Founder at Ampere Analysis, points to an extremely strong set of results for Netflix and suggests they will give the wider streaming market hope that the recent slowdowns can be overcome.

Netflix added nearly 9 million new subscribers globally in Q3 2023, with the new ad-supported tier an important contributor to ARPU in Q3, alongside new accounts being created to share with friends and family.

Broughton says of the account sharing countermeasures: “The new policy was largely rolled out in Q2, with an immediate effect on subscriber additions. Our subscription tracking systems have also shown a sustained uplift in gross additions over subsequent months – which is the key reason why Q3 results were very positive.

“Netflix has also managed to keep churn contained, despite effectively increasing prices for many of those sharing & borrowing accounts.”

Broughton notes that performance was strong in mature markets as well as in less-saturated territories, with subscriber growth coupled with ARPU growth. Netflix added 1.8m new subscribers in North America and nearly 4m in Europe. There were quarter-on-quarter ARPU increases of 2% in North America, 3% in LatAm and 1% in EMEA.

Broughton points out that Netflix's content release strategy has been minimally impacted by strikes, thanks to a lengthy pipeline, but subscribers will see the effects towards the end of this year.

Broughton believes the removal of the ad-free basic tier will now drive growth for the ad-supported tier. “This was one of the big adjustments to packaging strategy which Netflix has made in recent periods,” he points out.

“Prior to its removal, the 'standard with ads' package was far more unpopular than any of the other tiers, and represented just 10%-15% of Netflix's gross additions, by our estimates. The removal of the ad-free basic tier is a key reason that 30% of new sign-ups are now taking the ad-supported product.

“With further adjustments to package pricing across key markets – starting with the U.S., UK and France – we would expect to see new subscribers increasingly looking to the cheaper ad-supported tier.”

Broughton says the ad-supported tier is a slow-burn strategy for Netflix and the impact of increased ad-supported sign-ups will take time to wash through Netflix's subscriber base. “It is not like the account-sharing measures, which will have immediate obvious effects on the company's financials.”