Netflix projected to earn $1.7bn from advertising in the US by 2027 – Ampere

Netflix will earn $1.7bn from advertising in the US market, according to a new study from Ampere Analysis. The US will be largest single contributor to a global advertising income of $5.5bn by 2027, boosted to $8.5bn a year by ad tier subscription fees. Specifically, the ad tier is expected to increase the group’s revenue by 4.9% in 2023 and 7.1% by 2027 compared to the current business model.

Ad tier will add $2.2bn additional revenue by 2027 According to a new report by the analysis firm, the launch of an ad tier will see Netflix earn $2.2bn more by 2027 than it would by continuing with a subscription-only model, driven by an average revenue per user (ARPU) uplift combined with a modest increase in the overall subscriber base.

Assuming that the ad tier launches at $5.99 in the US, with pricing adjusted on a relative basis globally, and based on price elasticity analysis, Ampere
calculates that the ad tier will see a 3.2% subscriber uplift, with the remainder of ad tier customer migrating from the existing customer base.

Analyst at Ampere Analysis Ben French says: “The ad tier is primarily a customer retention tool in the US, with sign-ups coming largely from Netflix’s existing subscriber base. The US ad tier will be an effective measure against a shrinking and less engaged audience rather than a new customer acquisition tool. Increasing advertising rates will grow total ad income over time, offsetting the negative impact of a fall in viewing.” Ampere