Netflix said it’s targeting an early 2023 launch for a cheaper advertising tier as it seeks to stem subscriber losses and hopefully turn them back up. It will roll the plan out in a handful of markets first but didn’t say which ones.
On paid sharing, Netflix is in the “early stages” of monetizing the 100 million-plus households that are currently using the service for free and wants to roll out a easy-to-use paid sharing offering sometime in 2023. It’s been testing in Latin America and is “encouraged by our early learnings and ability to convert consumers to paid sharing.”
Back to ads, the streamer said a “lower priced advertising-supported offering will complement our existing plans, which will remain ad-free. Our global ARM has grown at a 5% compound annual rate from 2013 to 2021, so it makes sense now to give consumers a choice for a lower priced option with advertisements, if they desire it.”
The comments came in the shareholder letter that accompanies quarterly earnings.
Netflix last week announced Microsoft as its key technology and sales partner in the launch. “They are investing heavily to expand their multi-billion advertising business into premium television video, and we are thrilled to be working with such a strong global partner. We’re excited by the opportunity given the combination of our very engaged audience and high quality content, which we think will attract premium CPMs from brand advertisers.”
“We’ll likely start in a handful of markets where advertising spend is significant. Like most of our new initiatives, our intention is to roll it out, listen and learn, and iterate quickly to improve the offering. So, our advertising business in a few years will likely look quite different than what it looks like on day one.”
Netflix co-CEOs Reed Hastings and Ted Sarandos signaled the ad tier last quarter after earnings without much conviction and to the surprise of Wall Street and the broader industry. It had always eschewed ads and tended to strategically lead the pack of streamers — many of which now have ad tiers — not follow them. But the service has started to take shape and Netflix’ battered shares jumped today.
“Over time, our hope is to create a better-than-linear-TV advertisement model that’s more seamless and relevant for consumers,” the company said.
Netflix had attributed slowing subscriber and revenue growth a number of factors from connected TV adoption, to account sharing, competition and macro factors like sluggish economic growth and the impact of the Russia-Ukraine war.
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