Analysts from LSEG estimate that the streaming service added approximately 4 million subscribers during the July to September timeframe. Popular Netflix originals like "The Accident" and "The Perfect Couple" ranked among the most streamed content in the U.S. for the quarter, according to Nielsen data.
As subscriber growth decelerates, Netflix aims to redirect investor focus towards other key performance indicators, such as revenue growth and profit margins, with plans to cease reporting subscriber figures starting in 2025.
Pivotal Research analyst Jeff Wlodarczak noted that the company's strategy is to maintain a healthy subscriber growth rate while capitalizing on its scale, pricing power, and advertising revenue potential.
Although the ad-supported subscription model is expanding, Netflix has not disclosed specific financial details regarding this tier and does not foresee it becoming a significant growth driver until 2026.
This situation has raised concerns about the company's growth outlook. eMarketer's television and streaming analyst, Ross Benes, pointed out that Netflix's advertising revenue in the U.S. is currently under $1 billion annually, which he believes is not favorable for the company.
Some analysts suggest that Netflix should consider increasing prices and phasing out more ad-free plans to encourage users to switch to the ad-supported tier, which typically generates higher revenue per user.
In July of the previous year, Netflix announced it would discontinue the $9.99 monthly basic plan without ads for new users in the U.S. and the UK, and gradually phase it out for existing subscribers. The ad-supported plan is priced at $6.99 per month in the U.S., while the standard ad-free plan costs $15.49 per month.
The company has not adjusted the price of its standard plan since early 2022, and the ad-supported tier has remained at the same price since its introduction in late 2022.
The company, which operates in over 190 countries, is projected to generate ad revenue of $242.7 million in the third quarter, based on the average estimates from three analysts compiled by LSEG. Total revenue is anticipated to increase by 14.3%, reflecting a slightly slower growth rate than the previous quarter, reaching $9.76 billion.
To enhance its appeal to advertisers, the streaming service is prioritizing live events, particularly in the sports sector. Netflix is set to broadcast the much-anticipated boxing match between Jake Paul and Mike Tyson in November, followed by its inaugural NFL games in December.
Additionally, the upcoming second season of the popular South Korean drama "Squid Game," expected to debut in December, may contribute to subscriber growth in the final quarter of the year.
Since reporting its second-quarter results in July, Netflix's stock has appreciated by 12.4%, in contrast to a 5% increase in the S&P 500 index.