Netflix revealed its plans for a lower-cost advertising-supported service, betting that a $6.99-a-month option for consumers will help it shore up revenues in more straitened economic times.
Reed Hastings, chief executive, reversed his longstanding opposition to advertising support earlier this year, when the company’s once-blistering subscriber growth went into reverse in a sign of market saturation in North America.
The new ad-supported service, which launches in November, will “grow membership and, over time, build a significant incremental revenue and profit stream” across the 12 countries it will be available in next month, said Greg Peters, Netflix chief operating officer, on Thursday.
The advertising tier will force Netflix to provide metrics about viewership that it has long resisted releasing, including the size of its audiences. Starting next year it will partner with Nielsen, the ratings service, to measure and verify how many people in the US watched the ads.
Netflix’s subscriber warning this year spooked investors, who have rejected the growth-at-all costs streaming wars and are demanding to see a path to sustainable profit growth. This led Disney Plus to announce it will roll out an advertising tier in December for $7.99, while raising prices for customers who want to watch without ads. Other streaming services, including Hulu, Paramount Plus and Peacock already offer ad-supported versions.
Morgan Stanley estimates Netflix could raise as much as $3bn a year from advertising in 2026, but expects most of that to be generated by subscribers trading down from ad-free membership tiers.
Read more on Netflix’s ad-supported option here.
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2022-10-14 08:28:33Z
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