Netflix will earn more from advertising in Western Europe than the US

Netflix will earn more from advertising in Western  Europe than the US
Netflix will earn more from advertising in Western Europe than the US

Western Europe will generate annual revenues of $1.9bn for Netflix from advertising by 2027, more than the US and almost as much as North  America ($2.1bn when Canada is included), according to a new report by Ampere  Analysis. The study forecasts that an additional $841m will be earned from ad tier  subscription fees in Western Europe ($1bn in North America). 

Ampere believes that Netflix in Western Europe will experience an increase in average  revenue per user (ARPU) as a result of the launch of the ad tier. Specifically, the firm  predicts that 2023 ARPU will be 4.9% higher than without it, rising to 8.6% higher by  2027.

Western European viewers have the highest price sensitivity among Netflix’s customers which combined with relatively high advertising rates on a Cost per Thousand (CPM) basis makes advertising in the region a strong opportunity for the streaming giant.  

Almost one in five (19%) of W European users will be on the ad tier by 2027 According to Ampere’s report, 19.3% of Netflix users in this European region will view  content via the ad tier by 2027, most of them from the existing customer base. The ad  tier will stabilise this saturated region. Ampere estimates a subscriber growth (with ad  tier) in Western Europe of 1.8% above a subscription only model. A relatively strong  increase in the value of advertising-supported customers will boost the overall revenue  gain. 

Globally, Netflix will earn $5.5bn in annual advertising income by 2027, boosted to  $8.5bn a year by ad tier subscription fees. The launch will see Netflix earn $2.2bn more  by 2027 than it would with purely a subscription-only model, driven by an ARPU uplift  combined with a modest increase in the overall subscriber base. Ampere estimates that total customers will be 3.2% higher than without an ad tier. 

Analyst at Ampere Analysis Ben French says: “Very strong advertising rates for  streaming in Western Europe will contribute to a significant uplift in the value per  customer for those taking the ad tier. Although the overall boost to subscriptions is  predicted to be modest in the region, this increased customer value will see Western  Europe exceed the value of the US market by 2027.” 

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