Netflix adds eight million subs, says ad business will reach ‘critical scale’ in 2025
The third season of Bridgerton performed well for Netflix in the second quarter
Netflix added more than eight million subscribers in the second quarter to reach 277.7 million worldwide, helped in part by gains in its ad-supported business.
The streaming giant picked up 1.45 million more subs in North America, 2.92 million in Europe, the Middle East and Africa, 1.72 million in Latin America and 2.83 million in Asia Pacific.
During the quarter, revenue was up 17% year-on-year to US$9.6bn while operating income climbed 42% over the same period to US$2.6bn.
Netflix said its ad tier membership grew 34% from the previous quarter and claimed that it is “on track to achieve critical ad subscriber scale for advertisers” in 2025 in countries where the AVoD tier is available.
The ad tier now accounts for 45% of new member sign-ups in ad markets, said the streamer, adding that its strategy to phase out its Basic plan, which has already been eliminated in the UK and Canada, will be expanded to the US and France soon.
As announced at its advertising upfront in May, Netflix is building an in-house ad tech platform, set to be tested in Canada later in the year before being launched further afield in 2025. The company said the new platform will boost its ad-supported streaming business by giving advertisers new insights, new ways to buy and new ways to measure the impact of a certain campaign.
However, some will remain sceptical about the success of its advertising efforts to date, and news of the departure of its VP of global advertising sales, Peter Naylor, will do little to silence those critics.
For its part, Netflix says it is “confident” that advertising will be a “key component of [its] longer-term revenue and profit growth.”
In its letter to shareholders, Netflix was keen to emphasise the advantage it has built in streaming – and take some shots at its traditional SVoD rivals.
“Netflix generated more view hours in the Nielsen top 10 across film, series and licensed titles than all the other streamers combined,” it said, citing data from Nielsen’s most recent streaming report and calling itself and YouTube the “clear leaders in direct-to-consumer entertainment.”
According to Nielsen, Netflix accounted for 8.4% of all streaming in the US in June, second only to YouTube with 9.9%. The rest of the field lags far behind, including Prime Video (3.1%), Hulu (3%), Disney+ (2%), Tubi (2%), The Roku Channel (1.5%), Max (1.4%), Peacock (1.2%), Paramount+ (1.1%) and Pluto TV (0.8%).
“The challenge for so many of our competitors is that while they are investing heavily in premium content, it’s generating relatively small viewing on their streaming services and linear continues to decline,” said Netflix.
The streamer also addressed a frequently made argument that it commissions too much content and would benefit from taking a more curated approach to its content offering.
“Commentators often ask if Netflix needs so many shows and films, and the answer is an emphatic yes. With 278 million member households – and more than two people per household on average – we’re programming for an audience of over 600 million. It’s a huge number and to delight this many people, we need lots of great stories that appeal to many different tastes and moods. It’s why we continue to increase the investment in our programming, even as many of our competitors are pulling back,” the letter added.
Strong-performing titles in the second quarter included the third season of Bridgerton, UK hit Baby Reindeer, The Great Indian Kapil Show and live special The Roast of Tom Brady, which Netflix says drew its largest live audience yet.
