For some time, Netflix has been looking for new ways to increase its revenue. It launched a new ad-based tier in November 2022 and cracked down on password-sharing earlier this year.
According to its quarterly report, the changes resulted in 5.9 million new subscribers joining in the April-June period. While this may look impressive, the company’s revenue fell short of estimates. As a result, its share prices tumbled.
Netflix’s revenue numbers are still uninspiring
The video-streaming giant expected the increasing number of subscribers to help the company make more money. However, even with more subscribers joining, Netflix failed in that part.
According to the quarterly report, the revenue numbers are still disappointing. The company’s quarterly revenue increased by 2.7% from the previous year to $8.2 billion.
The problem is that Netflix’s gains per member decreased by 3%.
One of the main reasons behind this issue is that many new subscribers are from countries where the service is cheaper. Even users outside of these locations can get Netflix cheaper if they use a VPN when signing up.
The streaming pioneer also said more users opting for less expensive plans is another major reason for the numbers decreasing. To fight this, Netflix has quietly phased out its cheapest ad-free plan. Existing subscribers already paying for the $10 deal will still be allowed to keep it.
New members can now only choose between the ad-based tier ($7), the standard plan without ads ($15.50), and the premium one ($20).
The company expects the average revenue per membership to decline further in the third quarter.
Netflix share prices going down
Uninspiring revenue resulted in the company’s shares going down by close to 9% in after-hours trading.
The decline can, however, to some degree be attributed to some of them locking in profits. After all, Netflix shares have increased by over 50% so far in 2023.
Competition continues to be another major problem for Netflix, with more and more companies focusing on video streaming. A recent management letter confirmed that Netflix is facing a competitive battle amidst ongoing strikes in Hollywood and less content emerging.
Disney, for example, is now cutting back on content and increasing its prices. Netflix has taken a different approach and still hopes to increase its revenue through its usual practices and new password-sharing rules.
The company said it will continue to produce compelling movies and shows, boost its video game business, and improve monetization. Another thing Netflix said will do is improve user experience.