After two consecutive quarters of user decline (the first in almost a decade), Netflix saw 2.4 million paid net adds in Q3 (almost two and a half times more than its forecast). The company is at a precarious moment in time. While Netflix’s Q3 results create cautious optimism for future growth, the once market disruptor isn’t growing as fast as it once was. Instead, Netflix is the one being disrupted — by competitors that are aggressively scaling up.

A maturing market comes with consumer choice. And consumers are going to choose to spend their limited money and attention on the platforms that give them the greatest value. Netflix remains a strong brand with a coveted content slate. But the company is playing defense amid a competitive set that’s on the offense.

Netflix’s Ad-Supported Tier Is Mere Table Stakes

It’s a big deal for Netflix to have reversed its longtime stance against ads, yet come November 3, users will have the option to pay $6.99 as long as they’re willing to tolerate pre-roll and mid-roll commercial breaks. Not only will this provide cost relief to price-pinched users who might be considering canceling their Netflix subscription, but this price point will likely attract a new set of Netflix customers. According to Forrester’s May 2022 Consumer Energy Index And Retail Pulse Survey, 8% of US online adults indicate that they would consider subscribing to Netflix if it offered a lower-priced option with ads.

Beyond additional subscribers, ads will provide an additional upside to Netflix in the form of a new revenue stream from brands that are eager to reach the platform’s addressable audience. Netflix said in a press call last week that it’s almost sold out of its initial inventory. And with the foundational puzzle pieces in place for advertising leadership, delivery infrastructure, and measurement, Netflix is poised to scale its ad business quickly — something it has to do.

Netflix Games Is Far From A Value Lure

Netflix made news last month when it announced that it’s building an in-house games studio. Data from Forrester’s August 2022 Consumer Energy Index And Retail Pulse Survey signals a long road ahead for Netflix when it comes to games. Among US online adults who have access to a Netflix account, just 5% played at least one of the mobile games offered by Netflix within the past month. And over half (54%) said that they couldn’t care less about games on Netflix.

Although Netflix Games is touted as a value add to existing subscriptions, only 9% of US online adults (who are Netflix subscribers) indicate that they’re getting more value out of their Netflix subscription because of Netflix’s mobile games. Four percent say that it’s because of games on Netflix that they’re a continued subscriber. This could be spun as a positive if Netflix Games actually prevents 4% of its user base from churning. But questions of cost versus benefit of its gaming investment loom as the company still reels from heightened competition within its core streaming business — let alone being distracted by gaming.

Netflix Begins To Crack Down On Password Sharing

Netflix just launched “Profile Transfer” — a way for users who have a profile on another person’s paid account to transfer their personalized settings and recommendations when they start their own Netflix membership. But how exactly Netflix will incentivize or penalize users who are inappropriately sharing passwords is yet to be seen.

One thing is certain: Most users won’t pay more to maintain nonhousehold profiles. According to Forrester’s August 2022 Consumer Energy Index And Retail Pulse Survey, 13% of US online adults who have access to a Netflix account indicate that they’re willing to pay $2.99 more per month to legally share their Netflix account with another person in a different household.

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