Netflix To Grow To 10M Ad-Supported Global Subscribers, 3.1M In U.S., Canada: Analyst
- by Wayne Friedman , March 14, 2023
Netflix will reach 10 million ad-supported
subscribers globally by the end of this year, with about 30% -- 3.1 million -- coming from the U.S./Canada, according to MoffettNathanson Research.
This growth is slower-moving than previously forecast, when the research company estimated a total of 24 million global ad-supported subscribers.
“We are assuming that less than 25% of their global subscribers are taking the Basic [with ads] plan,” says the analyst note.
MoffettNathanson estimates growth of up to 18.4 million ad-supported subscribers in 2024, increasing to 35.4 million in 2027 -- with U.S./Canada ad-supported subscribers in 2024 hitting 5.6 million and then rising to 9.1 million in 2027.
Given that 12 markets are offering the ad-supported tier -- representing 60% of the all gross ad-supported subscribers -- it figures that “maybe 12% to 15% of the gross ads [subs] in any year may potentially be coming onto the basic with ads tier.”
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Looking at the broader Netflix subscriber picture, the research company expects subscribers to its ad-free tier -- coming from its Standard plan ($15.49/month) and its Premium plan ($19.99/month) -- will grow 5.5 million in 2023 to total 235.9 million.
Most of the growth for Netflix will come from the Asia-Pacific territories.
MoffettNathanson expects that in the U.S. and Canada, these ad-free subscribers will slip by one million -- to land at 73.2 million. Heavy domestic competition as well as the maturing streaming and CTV marketplace has driven a decline in the market over the last two years, compared to the 2021 total of 75.2 million.
While we haven't, as yet, revised our prediction that Netflix might attain a 30 milllion U.S. subscriber base in three years the progress of this effort so far is very disappointing. If this estimate---that Netflix's ad-supported platform gets to only 7.4 million U.S. TV homes by 2025 is accurate---and it may well be. This means that Netflix will attain the audience size of a medium sized to smaller cable channel and,, no matter what innovative targeting capabilities it comes up with it will compete for only a small portion of the total TV ad spend pie. Also, if its scale remains small---as predicted---it will have to become more competitive regarding CPM demands---as TV time buyers traditionally penalize low rated channels on their CPMs---- as well as allowing advertisers more freedom of choice about what content their messages appear in ---or adjacent to. Under such pressure, the likely trade-off will be a substantial increase in commercialization to garner sufficient GRPs to off-set the lower CPMs.
All of which causes me to ask whether Netflix has approached this whole concept in a very tentative manner---so as not to offend its core supporter "base". And also, why Netflix hasn't been more aggressive in promoting its AVOD offer to non-subscribers. Perhaps the new team recently installed at Netflix will come up with solutions. We shall see.