Netflix drops as ads tier not seen driving revenue in short-term, CFO says
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Netflix (NASDAQ:NFLX) fell 5% on Wednesday as leadership doesnât see meaningful impact in the near-term from its advertising tier.
Chief Financial Officer Spence Neumann said the streaming service saw a âmutedâ cancelation reaction after it cracked down on password sharing. An estimated 100 million people were not paying for a subscription and taking advantage of family and friend accounts.
âRevenue is building,â Neumann said, and will continue to do so through 2024. Those âspinoffâ subscribers, however, are trending more towards ad-free viewing, which isnât ideal for building up an ad business.
âWe have to scale the reach our of ads tier,â the executive said at a Bank of America conference.
For the third quarter, the company guided earlier this year that ARM, or streaming revenue divided by the average number of streaming paid memberships divided by the number of months in the period, would be flat to slightly down. He cited that 90% of growth is coming from outside of the U.S., where subscriptions are cheaper.
Neumann also pointed to huge continued growth opportunities given that stream is less than 40% of the U.S. market and far below in others. The total addressable market for streaming is estimated at $600B, and with NFLXâs 2022 revenue of $30B, thatâs still just 5% of the total.
The executive also said games remain a relatively small percentage of the content budget, and wonât see a big impact on growth in the short-term. Finally, he doesn't see sports being profitable. 

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