Netflix is continuing to focus on revenue growth and advertising, as it is removing its cheapest ad-free subscription option in multiple countries.
Netflix’s various strategies to gain an edge in the streaming market seem to be paying off, as the company posted another strong quarter this year.
The streaming giant’s revenue for the second quarter of 2024 was nearly $9.56bn, an increase of 16.8pc compared to the same quarter last year. Netflix’s net income also increased to $2.14bn, compared to $1.48bn last year.
Meanwhile, the company’s paid subscriber count grew by more than 8m, representing strong year-over-year growth of 16.5pc. This result follows a strong start to 2024, as Netflix saw significant growth to its profit and subscriber count earlier this year.
The streaming service has made a number of changes in recent years that were intended to boost revenue and subscriber figures. One of these was a crackdown on people sharing accounts between multiple households – which Netflix focused on after a record subscriber loss in one quarter of 2022.
Netflix also launched a cheaper ad-supported subscription option in various countries to draw in more users. The streaming giant was against the idea of adverts on its service for years, but had a change of heart in 2022 after it lost subscribers for the first time in a decade.
The company appears to be focusing more on ads as it is phasing out its cheapest ad-free option – its Basic plan – in various countries that have the ad-supported option available.
This Basic plan has been phased out in the UK and Canada – meaning users have to choose between the cheaper Standard with ads subscription or a much pricier Standard subscription. Netflix is also planning to phase out the Basic plan in the US and France.
“We believe that we’re on track to achieve critical ad subscriber scale for advertisers in our ad countries in 2025, creating a strong base from which we can further increase our ad membership in 2026 and beyond,” Netflix said in a statement. “Our ad revenue is growing nicely and is becoming a more meaningful contributor to our business.
“But building a business from scratch takes time – and coupled with the large size of our subscription revenue – we don’t expect advertising to be a primary driver of our revenue growth in 2024 or 2025.”
Forrester VP and research director Mike Proulx said Netflix’s commitment to advertising is “just beginning to show signs of scaling, meaning it’s headed in the right direction”.
“That’s notable because ad revenue is a critical component to Netflix’s go-forward growth calculus,” Proulx said. “It’s because the company can’t rely on net paid subscriptions alone as the primary contributor to revenue growth because they aren’t trending upward.”
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