- Netflix considered making an ad-supported tier its default option similar to Amazon but decided against forcing subscribers right into a change, Co-CEO Greg Peters said on an analyst call discussing the corporate’s Q4 results Tuesday.
- Netflix’s promoting segment grew 70% quarter-over-quarter in Q4 while adding 8 million monthly energetic users (MAUs) to reach a 23 million MAU total. The streamer didn’t break out specific revenue figures for ads but its overall financials impressed Wall Street.
- Peters’ comments got here as a limited variety of commercials are expected to arrive on Prime Video in select markets this month. The move will heat up competition with Netflix within the fast-growing connected TV (CTV) arena.
After a somewhat bumpy start, Netflix’s promoting business appears to be gathering regular momentum. In Q4, the segment experienced a rate of growth comparable to the prior quarter while adding a piece of latest users to achieve 23 million MAUs. Total company revenue through the period was up 12.5% year-over-year to $8.83 billion, above analyst estimates. Asked about future growth targets for promoting, Peters stated that there isn’t a “magic MAU number.”
“I believe it’s fair to say that we’ve still got loads of room to grow in all of the markets that we operate in,” said Peters. “And we’re focused on the extra work that we are able to do in that space. That means making the ads plan more attractive.”
Netflix’s top priorities with its promoting unit are scale and increasing sophistication on the technology and go-to-market fronts, including by constructing out internal teams. Peters pointed to binge sponsorships as a bit of the entertainment giant’s efforts to evolve its promoting to the subsequent level. Netflix in November also ran its first custom co-branded campaign for Geico for the premiere of the animated Adam Sandler vehicle “Leo.” Still, areas of the business remain a piece in progress.
“We’ve got tons to do on improved measurement,” said Peters. “We want to launch more ads products … we now have to construct, increasingly, the potential to be higher partners with advertisers and serve their needs.”
Another query is whether or not Netflix can sustain its current hot streak amid an influx of competition within the CTV space, which was forecast to hit $25 billion in spending in 2023. Amazon will begin to roll out ads on Prime Video toward the top of January, with members having the selection to pay an additional $2.99 monthly to preserve the commercial-free experience. Netflix once considered pursuing an identical approach but decided that it can be too jarring to subscribers accustomed to ad-free streaming.
Instead, Netflix seems to be leaning on easy economics to attract members. Netflix’s most cost-effective ad-free offering is $15.49 monthly with the continuing phaseout of the Basic plan. The price point could make the ad-supported route appealing as viewers get more selective with subscriptions.
Live programming can be a key piece of the streamer’s future as it looks to go toe-to-toe with offerings like Amazon’s “Thursday Night Football.” Netflix earlier this week unveiled a $5 billion deal to bring WWE’s “Raw” to its service starting in 2025. The 10-year pact includes the event of scripted TV and movies.
Discussing the chance, Netflix Co-CEO Ted Sarandos said WWE could act as an “inverse of Formula 1.” Netflix has played a very important role in drawing U.S. audiences to the premium racing sport that’s popular abroad and now goals to help global viewers discover pro wrestling, which is basically rooted within the U.S.
“We consider that WWE has been, historically, under-distributed outside of North America,” said Sarandos on the analyst call. “This is a worldwide deal, so we might help them and so they might help us construct that fandom all over the world.”
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