According to a new report by Ampere Analysis, Asia Pacific will be the most substantial growth region for Netflix’s ad tier, with one of the most significant increases in revenue and the highest average revenue per user (ARPU) uplift. High advertising tolerance in APAC will see the region near $1bn in ad revenue by 2027. In addition, $574m will be generated by ad tier subscription fees.
Among the three most significant regions globally, Asia Pacific will earn a greater percentage of its ad tier revenue from subscriptions (38% vs. 34% in North America and 30% in Western Europe) due to relatively low advertising rates. The region’s rapid rise in subscribers will see overall ad-tier revenue proliferate. Ampere explains that APAC viewers are the most positive about advertising, with four in 10 (41%) saying they do not mind ads. The comparative figures are 35% in North America and 24% in Western Europe. Ampere predicts that 22% of users in the region will take the ad tier option. Coupled with a subscriber growth of 17.6% by 2027, Asia Pacific will be one the fastest growth market for advertising income.
“Although not as valuable as the US market, Asia will be a powerful region for Netflix’s ad model. The high advertising tolerance will see the ad tier’s strongest uptake. Although rates charged for advertising are lower than other regions, strong subscriber growth will ensure Asia remains central to the success of Netflix’s new strategy,” Ben French, Analyst at Ampere Analysis, said.
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 of an ad tier will see Netflix earn $2.2bn more by 2027 versus a purely 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 they would have been had Netflix not launched an ad tier.