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Netflix Revenue Growth Slows As Ad Plan Fails To Gain Attention

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Netflix Revenue Growth Slows As Ad Plan Fails To Gain Attention

(CTN NEWS) – On Thursday, Netflix Inc. is anticipated to publish its slowest quarterly revenue growth as its ad-supported model struggles to draw consumers in the oversaturated U.S. market. This might put pressure on the firm to reduce content investment this year.

The pioneer in streaming has been struggling due to dwindling customer spending, rising production costs, and heightened competition from Disney+ and Amazon Prime.

It had staked its hopes on introducing the ad-supported tier, but according to analysts, there hasn’t been a sudden surge in subscriptions.

It is anticipated that the business will attract 4.5 million customers in the fourth quarter, which would be the smallest number for the Christmas season since 2014. 8.3 million more subscribers were gained last year.

Reuters Graphics

Reuters Graphics

According to analysts, the $ 6.99-a-month ad-supported plan does not include access to all titles and is too expensive to draw in a sizable number of users in the United States and Canada.

According to Jamie Lumley, an analyst at Third Bridge, “There are some problems in obtaining those subscriber targets looking at the saturation of the market and the diversity of options available.

As well as the fact that the pricing is not necessarily much below the competitors.”

This is likely to bring attention to Netflix’s robust content investment, which, according to finance head Spencer Neumann, will amount to roughly $17 billion yearly for the next few years.

According to Shahid Khan, partner and global head of media and entertainment at Arthur D. Little, “when debt was cheap, you could go and borrow a lot of money and spend that in content.”

Given the current interest rates, Netflix must be extremely picky about the material it approves and its financing.

Contrastingly, rival Walt Disney Co (DIS.N) anticipates content spending at the low $30 billion level for fiscal 2023, while Paramount Global (PARA.O) forecasts less than $10 billion.

Disney does not separate its content spending across its streaming and other businesses.

/ GETTY IMAGE

CONTEXT

The aftermath of the Russia-Ukraine crisis and a deteriorating economy caused Netflix to suffer significant subscriber losses in the first half of 2022, forcing the streaming pioneer to turn to advertise—a move it had long avoided.

Despite returning to subscriber growth in the third quarter, the company’s stock, which was a favourite among investors during its years of rapid development, still declined more than 50% by year’s end.

According to Refinitiv, the company’s sales is predicted to have increased by just 1.7% to $7.84 billion in the three months ending in October. That would represent the lowest level since the company’s 2002 IPO.

The majority of the more established streaming sites have bottomed down as well, according to MoffettNathanson, who also noted that Netflix’s reach decreased by 200 basis points in the quarter.

Reuters Graphics

Reuters Graphics

Even so, some analysts think that the ad-supported strategy will be successful in the long run, particularly in developing regions where consumers’ purchasing power is lower.

FUNDAMENTALS

  • When Netflix publishes results on January 19, earnings per share are projected to be 44 cents.
Disney outperforms streaming peers in 2022

Disney outperforms streaming peers in 2022

WALL STREET SENTIMENT

  • Of the 43 analysts covering the stock, 21 give it a “buy” or higher rating, 19 a “hold,” and three a “sell.”
  • The stock’s median analyst price objective is $330, up from $278.97 on November 1 when the advertising campaign began.
  • The price of Netflix is currently $324.43.
 

QUARTER ENDING

 

 

REFINITIV IBES ESTIMATE

 

 

ACTUAL

 

 

BEAT, MET, MISSED

 

 

Sep. 30 2022

 

 

2.13

 

 

3.10

 

 

Beat

 

 

Jun. 30 2022

 

 

2.94

 

 

3.20

 

 

Beat

 

 

Mar. 31 2022

 

 

2.89

 

 

3.53

 

 

Beat

 

 

Dec. 31 2021

 

 

0.82

 

 

1.33

 

 

Beat

 

 

​​Sep. 30 2021

 

 

2.56

 

 

3.19

 

 

Beat

 

 

Jun. 30 2021

 

 

3.16

 

 

2.97

 

 

Missed

 

 

Mar. 31 2021

 

 

2.97

 

 

3.75

 

 

Beat

 

 

Dec. 31 2020

 

 

1.39

 

 

1.19

 

 

Missed

 

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