Mike Proulx, vice president and research director at Forrester, joined Cheddar News to discuss the streaming giant Netflix.

Mike Proulx, vice president and research director at Forrester, joined Cheddar News to discuss what we can expect from Netflix’s Q3 earnings, indications of account-sharing restrictions, and its new ad tier model. "Netflix is at a pivotal moment in time right now because you know the once disruptor is now being disrupted by competition, that's quickly rising to the top," he said.

Netflix at 'Pivotal Moment' With Ad Tier, Password Sharing Crackdown

So joining us now to discuss is mike Prugh vice President and research director over at Forrester. Mike good to have you here as always. So what's going to be sort of the key that you're watching out for these earnings report, what are you watching? It's all about growth. Look, we've seen two consecutive quarters of user declines for netflix and they're projecting a million new users will see if that actually happens. But netflix is at a pivotal moment in time right now because you know the once disruptor is now being disrupted by competition, that's quickly rising to the top. Disney Plus continues to see user growth during a time where netflix was seeing losses. Yeah, I'm also old enough mike I think you are as well where netflix didn't care about password sharing. Their biggest concern was sleep and Fortnite. Now, netflix says they want to crack down on password sharing because it's costing them way too much money. Will they be able to do that And do sort of see any sort of easter eggs that they're going to mention about that in this report. So yesterday they announced essentially a precursor to their track down, which is the ability for users to transfer their profiles to their own accounts and that will allow them to take their settings and their preferences along with them. So once netflix does start cracking down, they've yet to announce exactly how they're going to be doing that, There was some indications that they might charge additional dollars for users that are on non household accounts. But when we survey netflix users about whether or not they're willing to pay more to support a non household users overwhelmingly, Netflix has said, no way. You mentioned also earlier. Look for many years netflix had this market all to themselves, everybody sort of had to catch up to them. And according to a report from just watch the market share for netflix shrunk 2% from earlier this year. So just how are they planning to sort of turn things around given the fact that now they actually have competition against a lot of other streamers right now, Netflix is reversing its longtime stance against ads and it made news just last week, two weeks ago when it finally announced that as of november 3rd, it is rolling out its ad supported tier at 6 99. This is critical because we've reached a point now in the consumer. So streaming landscape where consumers have had a ceiling a ceiling both in terms of where they spend their attention and how much money they can be spending on streaming services. So it is critical that netflix be able to offer price pinch users right now, especially as we're going to an economic downturn an option for a lower price. Well, having said all of that, do you still put a lot of emphasis in the subscriber numbers because look for the longest period of time, netflix was only getting domestic users on the margins now. I I believe over the last couple of years, they were barely getting over a million for the whole year in domestic numbers. So would you still say the subscriber growth is still important. What are you looking for in that front? It is important. It's important in the sense of is it trending up or trending down? And how does netflix subscriber growth trend compared to that of its competition? What I would also say is on the advertising front, not only might that stop some of the hemorrhaging that netflix has been seeing in its user base, but it's also adding an additional revenue stream for netflix. And you know on that note, netflix has already announced that it has almost sold out of its initial inventory. So there's a lot brand interest in trying to reach netflix's addressable audience. Yeah, let's talk about that for a minute because this obviously is gonna be new for so many people. Netflix saying maybe you would see about five minutes of commercials an hour here, but you're absolutely right. This is a whole new revenue stream for them. Do you kind of almost think that they can sort of change the game on the advertising side for a streamer? What are you sort of looking out for from them? Look, it is table stakes at this point, Most streaming services now have ad supported tiers. There are very few that are left Disney Plus is about to launch its own ad supported tier. The holdouts right now or Apple tv Plus and amazon Prime Video, which continue to be exclusively ad free. So what netflix is doing simply they have to be doing at this moment in time in their company's trajectory. So from a user experience perspective, there will be some trade offs. Not all pieces of content will be available on netflix. On the ad supported tier, it will be a little bit lower resolution and yes, consumers are going to have to deal with pre and during ad breaks to be able to access. Netflix is ad supported tier. Yeah, it's gonna be interesting to see what the report says. Of course, will have a full breakdown of the report on closing bell later today. Mike Prugh, vice president and research director at Forrester. Mike, thank you so much for joining us today.