Netflix enters new era with ads on platform for first time
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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.
- At $6.99 a month, the option costs $3 less than its cheapest ad-free tier and $1 less than Hulu's cheapest ad-supported plan.
- There will be four to five minutes of ads per hour, which appears to be about average for other major streamers.
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."
