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Analyst Pushes Back Against Sky-High Revenue Projections for Ad-Supported Netflix

David Satin

Speculation regarding how much the forthcoming ad-supported tier will fatten Netflix’s bottom line has been difficult to avoid in the streaming industry. One report from earlier this summer suggested that by 2027, Netflix will have generated an extra $5.5 billion thanks to the ad-supported video-on-demand (AVOD) subscription option.

But new analysis done by the independent research firm MoffetNathanson suggests that those high revenue projections may be a bit over-inflated. MoffetNathanson’s projection that Netflix will reach a total valuation of $38.2 billion by 2025 is 8% lower than the market consensus on revenue forecasts for the future of the company.

The company does believe that Netflix is still in line to hit $1.7 billion in new ad revenue in the U.S. alone by 2025, but thinks other firms are overestimating the number of new subscribers Netflix will attract to the ad-supported tier. MoffetNathanson believes that some of that increased ad revenue will be offset by the fact that many ad-tier subscribers will be customers that migrated from a more expensive Netflix plan, not brand new Netflix customers.

This projection aligns with a study done earlier this year, which suggested that many Netflix users are already watching ad-supported streaming on other platforms, and will thus be more willing to accept ads. Netflix already has 220 million global subscribers, which means the pool to pull new customers from simply isn’t that large.

There are few stories in the streaming industry that are causing as many waves as the upcoming debut of Netflix’s AVOD tier. Speculation has run rampant on every facet of the planned launch, from the price of a subscription to the price that Netflix is asking companies to pay per ad. Until the company actually rolls out the new tier (which could be as soon as next month), don’t expect the conjecture to die down.

Netflix

Netflix is a subscription video streaming service that includes on-demand access to 3,000+ movies, 2,000+ TV Shows, and Netflix Originals like Stranger Things, Mindhunter, Queer Eye, and Russian Doll. They are constantly adding new shows and movies — and have even begun creating original films like The Irishman (Robert De Niro, Al Pacino) and Dolemite is My Name (Eddie Murphy).

The service offers a library of classic comedies like Friends and The Office, but those will be moving to HBO Max and Peacock, respectively, next year.

Netflix offers three plans — on 1 device in SD with their “Basic” (JP¥800) plan, on 2 devices in HD with their “Standard” (JP¥1,200) plan, and 4 devices in up to 4K on their “Premium” (JP¥1,800) plan.

Netflix spends more money on content than any other streaming service meaning that you get more value for the monthly fee.

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