Netflix is ramping up its startling embrace of advertising, hinting to employees that a lower, ad-supported tier of its streaming service could be available by the end of 2022.
The new timescale would be much shorter than the 1-to-2-year prediction made by Co-CEO Reed Hastings during a quarterly earnings interview last month. According to The New York Times, which ascribed the knowledge to two unidentified insiders, the altered prognosis was communicated to employees in a memo.
According to the New York Times, the letter stated, “Yes, it’s fast and ambitious, and it will necessitate some trade-offs.”
Netflix stock has dropped dramatically since delivering poor earnings twice this year, wiping out around two-thirds of the company’s market worth.
The market for ad-supported streaming is flourishing, with the Interactive Advertising Bureau estimating a 57 percent increase in connected-TV ad revenue in 2021 over the previous year. Meanwhile, Netflix is under increasing pressure to maintain its subscriber growth. The business continues to lead the sector with 222 million global subscribers, but it lost consumers for the first time in 11 years last quarter and has warned that it could lose another 2 million this quarter.
Management has previously stated that the overall available market for its service, which has matured in the United States, is 1 billion households. Many Wall Street experts believe the true figure is far lower, and the belief that Netflix has struck a growth ceiling has sent shivers up the collective streaming spine.
Many younger competitors, such as Disney+ and HBO Max, have turned to advertisements as a supplement to subscription revenue, with Disney’s cheaper plan in the works and HBO Max with Ads only a year old. Peacock, Paramount+, and Discovery+, for example, offer both ad-supported and ad-free subscription plans. Amazon Prime Video now broadcasts advertising during live sports, leaving Apple TV+ and Netflix as the only major streaming services that offer an ad-free experience.
Consumer polls show a high level of price sensitivity when it comes to streaming, especially now that inflation is on the rise in 2022. Netflix is the most expensive service on the market, with its most popular package costing $15.49 per month. Hastings said he reversed his former anti-ad attitude in part because technology had progressed enough to provide for a smooth user experience.