The last few months have been something of an acid test for Netflix, launching its Basic with Ads subscription tier after a very rough year. AlphaROC has an early read, and contrary to recent press, our projections have the streaming service back on track.
Whether you are a returning subscriber or have just recently subscribed to AlphaROC's Insights, our data on Netflix's response to the harsh subscription losses it faced last year should have everyone keeping a close eye on the streaming powerhouse. The launch of its fresh ad-supported tier has had a decent start, putting the company in a much better place for 2023 than 2022.
When Netflix launched its ad-based tier in the beginning of November, AlphaROC estimated that the move could add 6 to 14 million new subscribers, or around 10-25% of the company’s base. After 2 months, our data reveals that so far, new subscribers with ad-supported basic accounts have already added a few percentage points to the base. Assuming the same incremental growth, Netflix could very well exceed the lower end of our projections by the end of the year.
What made last year’s subscriber losses so shocking is Netflix’s relatively low churn rate. In fact, our data shows that a majority of current subscribers are Netflix veterans who subscribed more than three years ago! Thankfully, its new tier is exhibiting plenty of promise in this regard. For one thing, a majority of those with ad-supported basic plans are indeed returning subscribers, a perfect demonstration of how crucial a role the ad plan will play in making churn manageable again. Advertisers will be especially encouraged by the level of engagement from this tier; ad-plan users are actually streaming just as much as premium ones.
Moreover, though the ad-supported tier clearly attracts the price-sensitive, users come from every geography, age, race and gender. This will be a huge boon for advertisers, satisfying their hunger for viewer characterization.
Ad supported tier
They're Still Watching
Almost 20% of subscribers are already on the ad-supported tier
Distribution of Netflix Subscibers
Churn trends
Can't Put A Price On Loyalty (Or Can You?)
More than half of Netflix subscribers have been with the service for over 3 years
TAM expansion
The New Frontier
Almost half of those who joined in the last 3 months chose the Basic with Ads tier
Ad supported tier
Not Enough Smart TVs In The World
The new ad-based tier has made important strides with returning and new subscribers, great for churn!
Where ad-supported subscribers are coming from
Intent
Everyone Needs An Ad-Break, Sometimes
Intent has steadily increased for an ad-supported tier
Ad load
Enough For A Bathroom Break and a Snack
Netflix describes the ad-supported tier as delivering 4-5 minutes of ads per hour. Early indication is ad load is still low
Engagement
Binge On, My Wayward Son!
High usage is a major advantage for advertisers
Demographics
Unity In Diversity (And Affordability)
Demographic slices = rich data for advertisers
Region and income of ad-supported subscribers (%)
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