Cowen Sees 'Significant' Future Revenue Upside From a Netflix Ad Tier
A Netflix ad-supported tier could add about 4 million U.S. and Canadian subscribers next year, Cowen analyst John Blackledge wrote investors Wednesday. An ad tier could generate revenue per member of $17 monthly, with ad revenue of about $10 and…
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subscription revenue of $7, Blackledge said. Cowen estimates 41% of existing Netflix subscribers would switch to an ad tier, which would imply a blended average revenue per user that’s 8% higher than Q1 levels for the U.S. and Canada. Long term, the ad tier could drive “significant” long-term revenue upside, he said, maintaining an “outperform” rating on the stock. Netflix CEO Reed Hastings floated the idea of lower-priced ad-supported tiers on an April earnings call (see 2204200002) after Netflix posted a 200,000 paid subscriber loss for Q1. The stock closed 7.5% higher Wednesday at $180.11. Netflix will release its second-quarter financial results July 19, said the company Wednesday. Its April forecast was for Q2 net subscriber losses of 2 million accounts on top of the 200,000 subscribers it lost in Q1.