Nov 3, 2022 - Economy

Netflix enters new era with ads on platform for first time

Illustration of the Netflix logo made of dollar bills.

Illustration: Shoshana Gordon/Axios

"Never" turned to "now" on Thursday, when Netflix rolled out ads on its platform after years of saying it wouldn't.

Why it matters: The timing is terrible, but the company needs to keep attracting new customers amid greater competition.

  • Netflix is not only vying for marketing dollars against other major streaming media platforms, but also against just about every other company out there now getting into ads — grocers, ride-hailing apps, hotels, and even Microsoft, Apple and Amazon.
  • At the same time, advertisers have been pulling back as they watch the economy and consumer spending more closely.

Driving the news: Netflix launched a new subscription tier called "Basic With Ads" midday today in the U.S. and eight other countries.

The big picture: Netflix appeared to have rushed to make its ad-supported tier available to get ahead of Disney, which plans to launch its own first-ever ad-supported option for Disney+ on Dec. 8.

  • Both will now compete against Hulu, NBCU's Peacock, Paramount+ and Roku, as ad spend slows.

What they're saying: There's also still skepticism about how well they're going to be able to pull it off, Jamie Lumley, an analyst from Third Bridge, tells Axios.

  • Other players, such as Peacock, have already had a head start, he adds.

What to watch: Whether Netflix changes it content strategy for ad-supported customers and how it continues to crackdown on password sharing to recover revenue.

  • Netflix's stock is down some 55% so far this year.
  • In a research note last month, Goldman Sachs analysts concluded, "any successful execution on those initiatives [would] likely cause Netflix to sustain its recent reversal of pronounced stock underperformance."
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