Netflix’s annual ad revenue in West Europe to hit $1.9bn by 2027, Ampere forecasts

Netflix’s ad revenue in Western Europe will hit US$1.9bn annually by 2027, according to new data from Ampere Analysis.

The UK-based research and insights firm forecast that, by 2027, around one in five (19.3%) Netflix users in Western Europe will have switched to the AVoD tier, which is scheduled to begin rolling out internationally next year.

Overall, Ampere said it views the introduction of an ad-supported tier as a strong financial move. Globally, the research firm predicted Netflix will earn US$5.5bn in annual advertising income by 2027, with an additional US$3bn from subscription fees for the ad tier.

After years of proclaiming that AVoD would never be a part of its business, Netflix revealed earlier this year that it would change course and bring ads on to the platform, eventually selecting Microsoft as its global ad partner.

The Ampere data underscores the ongoing importance of the Western European market to Netflix as it looks to fend off stiffening competition from Disney+, Paramount+ and HBO Max, the latter of which will be combined with Discovery+ next year.

Unsurprisingly, the US will be the largest single market for ad revenue, with around US$1.7bn generated there annually by 2027, said Ampere. Canada will provide around US$400m, taking the total for North America to around US$2.1bn. In addition, the Asia Pacific region will contribute almost US$1bn by 2027.

The introduction of an AVoD tier will see Netflix generate US$2.2bn more by 2027 than it would have done if it remained an ad-free service. This uptick will be driven by increase in average revenue per user in addition to a modest increase in the overall number of subscribers.

The introduction of the ad tier will also serve to stabilise the subscriber base and reduce churn in North America and Western Europe, noted Ampere.

“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,” said Ampere Analysis analyst Ben French.

“Although the overall boost to subscriptions is predicted to be modest in the region, this increased customer value will see Western Europe exceed the value of the US market by 2027.”