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Thursday, February 2, 2023
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Netflix CEO calls resisting ads a mistake

Netflix launched a lower-priced, ad-supported version of the streaming service earlier this month.

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Netflix Inc (NFLX.O) co-founder Reed Hastings on Wednesday said he was “wrong” to resist ads for his streaming service.

Hastings said Hulu proved streaming services could support advertising and offer consumers lower prices.

“I wish we had flipped a few years earlier on it,” Hastings said during the New York Times DealBook summit.

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Netflix launched a lower-priced, ad-supported version of the streaming service earlier this month.

“The big thing that I missed is I was on the Facebook board, so I bought in for a decade to the belief that systems relying on data were going to be able to do higher CPMs than anyone else,” Hastings said, referring to a marketing metric used to calculate the cost per advertising impressions. “So Google and Facebook were going to mop up the world — and they have in non-TV advertising.”

“What I failed to understand is that there is a lot of TV advertising that now couldn’t find the viewers because the 18- to 49-[year old] segment had moved on and was not watching linear TV,” he said.

Advertisers were “desperate” for avenues in connected TV and the internet, Hastings said, but Netflix was still on the sidelines.

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“We didn’t have to steal away the advertising revenue. It was pouring into the connected TV. The inventory was there,” he said.

Hulu, Warner Bros. Discovery’s HBO Max, NBC Universal’s Peacock, Paramount Global’s Paramount+, and others already offer cheaper, ad-supported options. Disney+ plans to launch a cheaper, ad-supported tier, while also raising prices for its commercial-free option and other streaming services.

There are also free streaming services, such as Paramount’s Pluto and Fox Corp.’s Tubi, which make revenue solely through advertising. Recently, Fox said Tubi’s ad revenue, which grew 30% in its most recent quarter, lifted its earnings.