Company Sees 25% of New Subscribers Opting In

Netflix surged 9% on Thursday, following the release of details regarding its new ad-supported tier. The streaming service recently disclosed that its more affordable ad-supported option has garnered five million monthly active users. Furthermore, in areas where this tier is available, approximately 25% of new subscribers are opting for it.

  • This update was presented during Netflix's inaugural pitch to advertisers on Wednesday, marking the first time the company participated in the industry's Upfront presentations
  • Other major media companies, such as Comcast's NBCUniversal and Warner Bros. Discovery, also highlighted ad-supported streaming options during their presentations

Netflix introduced its ad-based option in late 2022, a strategic move made after experiencing periods of stagnant subscriber growth, which negatively impacted its stock performance.

Media Companies Cut Content Costs and Embrace Ads for Profitability

Media companies that were once primarily focused on expanding their subscriber base for their streaming services are now shifting their attention towards achieving profitability. To accomplish this, some have been cutting costs in content spending and incorporating advertising models into their platforms.

  • During Disney's recent earnings report, CEO Bob Iger mentioned that the ad-supported option of their Disney+ streaming service was seen as an additional means to attain profitability. However, Disney+ experienced a loss of four million subscribers in the same quarter
  • Netflix's ad tier, priced at $6.99 per month, includes 15 or 30-second commercials before and during content playback
  • This represents a change in direction for the company's management, who had previously stated their reluctance to incorporate advertisements into their platform
  • Netflix partnered with Microsoft to launch this ad option, and Nielsen will be providing ratings for its content later this year, assisting advertisers in better understanding its reach and potential impact

Following the launch, Reed Hastings, the founder and former CEO of Netflix, admitted to initially being hesitant about introducing advertising on the platform. When the ad-supported tier was introduced in November, it was priced $1 lower than the ad-supported options of Disney+ and Hulu.

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products. Please note that the writer of this article is not registered as a financial advisor.

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