Netflix set to report a slowest revenue growth as Ad plan struggle to attract customers  

Netflix is expected to report its slowest quarterly revenue growth on Thursday as its ad-supported plan struggles to attract customers in the saturating U.S. market, which could pressure the company to pull back on content spending this year.

The streaming pioneer has been reeling under strained consumer spending, rising costs of financing production and increased competition from Disney+ and Amazon Prime.

It had pinned its hopes on the launch of the ad-supported tier, but analysts say they have not seen a burst of subscriptions.

The company is expected to have added 4.5 million subscribers in the fourth quarter – the lowest addition for the holiday period since 2014. It added 8.3 million subscribers a year ago.

The $6.99 per month ad-supported plan does not have access to all titles and is not cheap enough to win over significant numbers of customers in the United States and Canada, analysts say.

“Looking at the saturation of the market and the variety of different options available, and the fact that the pricing is not necessarily significantly below the competition, there are some challenges in attaining those subscriber targets,” said Jamie Lumley, an analyst at Third Bridge.

That is likely to draw focus on Netflix’s aggressive content spending, which finance chief Spencer Neumann said in July would total about $17 billion annually for the next couple of years.

“When debt was cheap, you could go and borrow a lot of money and invest that in content,” said Shahid Khan, partner and global head of media and entertainment at Arthur D. Little.

“Given current interest rates, Netflix will have to be very selective about green-lighting content and how they would finance it.”

Reuters

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