Even in the midst of the industry’s tumultuous labor strikes, Netflix issued a surprisingly strong Q3 earnings report this week, showing subscriber growth of 8.76 million during the quarter.
This success was influenced largely by the impact of a crackdown on unauthorized sharing of account passwords and the appeal of Netflix’s new low-cost ad-supported tier of service. This increase in new subscribers was more than twice the number analysts were expecting, resulting in an 18% surge in the price of the company’s shares.
Netflix also reported over 70% increase in the number of sign-ups for its ad-supported tier of service. Netflix has done everything that it can to make this offer appealing to consumers, maintaining a low price on the service while raising prices on its basic and premium plans by $2 each. This strategy accomplishes two key objectives by increasing revenue from traditional subscribers while creating a sizeable new audience for advertisers.
Netflix is unique among major streaming providers as the only one making money, with profit margins for 2023 expected to wind up at 20% and projected for next year to increase to 22-24%. Especially because the cost of production is expected to increase as a result of new deals with Hollywood’s labor unions, it is essential for any streamer to drive toward profitability now.