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Netflix’s latest move shows how streaming TV is tipping toward ads

A capital N filled with megaphones on a bright red background.

Illustration by Robyn Phelps / Getty / The Current

Netflix is voicing loud and clear that it would prefer that everyone stopped caring so much about its subscriber numbers.

Not that there’s anything wrong with the figures; in fact, Netflix added over 9 million members in the first quarter this year, bringing its total to nearly 270 million worldwide, the company said in its Q1 earnings report last week. And yet, it also announced that it would stop reporting quarterly subscriber updates beginning next year. (It still plans to announce key milestones.)

In its letter to shareholders, Netflix said that it’s “developing new revenue streams like advertising and our ‘extra member’ feature, so memberships are just one component of our growth.

“In addition, as we’ve evolved our pricing and plans from a single to multiple tiers with different price points depending on the country, each incremental paid membership has a very different business impact,” the company added.

Netflix isn’t the only streamer that has diversified its revenue. Every major streaming platform, aside from Apple TV+, now offers customers an advertising plan. And some, like Disney+ and Max, will soon follow Netflix in cracking down on password sharing, an initiative the company calls “paid sharing.”

Some analysts saw the move to no longer report subscribers as a way to get ahead of a potential subscription slowdown after the surge from paid sharing wanes.

“It might be a few more quarters of paid-sharing benefits, but we don’t really know what the next catalyst will be after that for a member addition,” Magalie Grossheim, senior equity research analyst at M Science, told Reuters. “I think that’s probably contributing also to why they’re deciding to stop reporting those numbers.”

But big picture, Netflix’s decision to halt subscriber updates each quarter is one of the biggest signs yet that the streaming industry could be approaching a ceiling on member growth, some experts tell The Current, and that the path forward lies in advertising revenue.

“There are only so many net-new subscribers [streamers] can chase, especially in a world now where there is so much competition and consumer choice,” Mike Proulx, VP and research director at Forrester, tells The Current.

Alex Holtz, research director of worldwide media and entertainment strategies at IDC, agreed. “I think what Netflix is trying to avoid is, if people just focus on subscribers and nothing else, then basically you’re not paying attention to all the programming that they deliver that’s ad supported,” he says.

“I think there is going to be a disengagement between revenue and subscriber numbers due to the growth of their ad-supported business,” he adds.

The company doesn’t break out subscriber numbers for its ad plan, but President of Advertising Amy Reinhard said in January that the plan had 23 million global monthly active users (which is different from paying members).

"As revenue models continue to evolve and change for these streaming services, it just simply isn’t all about subscribers anymore.”

Mike Proulx, VP and research director, Forrester

Netflix has seemingly been taking measures to build its advertising business since it launched in late 2022. For instance, it removed its least expensive ad-free plan. And a byproduct of paid sharing might be that it is encouraging those getting kicked off other people’s plans to subscribe to the ad-supported plan.

Proulx says that the most optimistic way of looking at Netflix’s announcement, as it pertains to the larger industry, is that it “represents a maturing of the streaming marketplace.”

“At the end of the day, as revenue models continue to evolve and change for these streaming services, it just simply isn’t all about subscribers anymore,” Proulx says. “It’s just going to be one part of the overall revenue equation as advertising becomes more of an outsized part of the model.”