Netflix Now Has 7 Million Domestic Ad-Supported Customers, But Number of Global Hits Plummets in 2023
As Netflix continues to gain subscribers, it may have a harder and harder time getting them all to watch the same content.
Netflix may have more subscribers than any other streaming service in the world, but that puts it in a unique position: that of leader. That means that Netflix has to continue experimenting with ways to add and retain customers, while its competitors can continue to chip away at its subscriber advantages and see if Netflix’s experiments are successful before deciding whether or not to emulate them moving forward. One of the major recent overhauls by the world’s largest streamer was the introduction of an ad-supported tier, and a new report indicates that this strategy has been increasingly successful for Netflix. However, it could also be leading to a dilution of Netflix’s ability to concentrate its customers’ attention on big-name titles.
- Netflix now has 7 million North American customers using its ad-supported plan, nearly 10% of its global subscriber base.
- The streamer produced just 10 global hits in 2023, as opposed to 22 in the year prior.
- Strikes by the WGA and SAG-AFTRA hit global production schedules hard, and Netflix could see the number of global hits it produces rebound.
In the months following the introduction of Netflix’s ads plan, the streamer struggled to get customers to adopt the lower-cost option. However, Netflix saw more success compelling viewers to sign up for the Standard with Ads plan once it rolled out password-sharing restrictions, and the discontinuation of its cheapest ad-free plan also helped it attract customers to the commercial-supported option.
Now, nearly 18 months after the introduction of the ads plan, Media Play News cites a report from Wedbush Securities which states Netflix has 7 million North American viewers on its ad-supported tier. That’s in addition to the 16 million customers using the ads plan in other global territories. Overall, Netflix has more than 260 million worldwide subscribers.
Gaining more ad-supported subscribers in North America specifically is an important goal for Netflix, because that’s the region where the global ad market is strongest. Essentially, Netflix gets more revenue for ad-supported customers in the U.S. and Canada than it does in other countries.
Wedbush analyst Michael Pachter projects that Netflix will add another 8.5 million subscribers in the first quarter of 2024, raising its global total to nearly 270 million. In Q4 of 2023, the Standard with Ads plan accounted for 40% of all sign-ups to the streamer, and Pachter expects that percentage to keep climbing.
“[Our] survey [U.S.-based] indicates that ad-tier growth is expected to continue in Q2, as new and returning subs are more likely to opt for ad-tier,” Pachter said.
Is Netflix’s Large Subscriber Base Hungry for New Hits?
The growing customer base for Netflix is clearly a positive thing for the company, as it collects more subscription revenues from those customers. But the expansion of Netflix’s audience could also be leading to fewer people deciding to watch the same shows on the platform.
A survey from the British streaming data company Digital i, as reported by Indie Wire, shows that Netflix produced 10 “global hits” in 2023, down from 22 in the year previous. Digital i defines a global hit as a series that is viewed by 30% or more of Netflix subscribers in the North American, European, and Latin American markets.
Indeed, 2022 was a huge year for Netflix, with shows like “Wednesday” and “Stranger Things” either premiering or putting out new seasons. Premieres like “Queen Charlotte: A Bridgerton Story” and the live-action adaptation of “One Piece” still attracted large audiences for Netflix in 2023, but the streamer’s executives must be concerned with the precipitous drop in output of its global hits last year.
Streaming commissions in 2023 fell below levels seen during the height of the COVID-19 pandemic, which likely played a role in the reduction of global hits for Netflix. The WGA and SAG-AFTRA strikes were likely the biggest culprit, however; refusal by studios and streamers like Netflix to meet demands for fair treatment by the largest writer and actor unions in Hollywood for months resulted in work stoppages that essentially derailed the entire 2023 TV production schedule.
Data compiled by Ampere Analysis demonstrates that 481 scripted shows were released in the United States in 2023, a drop of more than 150 titles from 2022 and 2021. In other words, it wasn’t just Netflix seeing declines in the number of shows released during 2023, and industry-wide effects of the strikes were the most obvious culprit.
The way Netflix chooses to allocate its production money could also be having an effect on its decline in global hits. The streamer’s international content spend outpaced its domestic one for the first time this year, and viewers in different regions may be more attracted to shows produced closer to home. That will lead to Netflix viewers watching a higher number of titles, instead of seeing large numbers of global viewers concentrate on the same batch of shows.
There are few reasons for Netflix to worry about the drop in global hits as defined by Digital i. It still has the largest subscriber base in the world, and it has a healthy portion of viewers signed up to its ad-supported plan, particularly in North America. However, it will need to keep an eye on the number of worldwide streaming sensations it produces, to ensure its content creation engine is still working at peak efficiency.
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, Squid Game, The Crown, Tiger King, and Bridgerton. They are constantly adding new shows and movies. Some of their Academy Award-winning exclusives include Roma, Marriage Story, Mank, and Ma Rainey’s Black Bottom.