Netflix executives on Tuesday detailed the company’s plan to add an advertising-supported tier, saying that the goal is to launch in early 2023 in markets “where advertising spend is significant.”
Netflix COO Greg Peters said on the company’s earnings call that the company has already held talks with major players in the sector.
“We have seen a lot of excitement in our early discussions with brands, holding companies and agencies,” Peters said, adding that marketers have long expressed a desire to place ads next to Netflix content. “That enthusiasm, that alignment is increasing my optimism, my excitement for getting this out there.”
“The response that we are getting from a brand and advertiser perspective is quite strong,” Peters added, noting that “at least initially, the unit economics will be quite good.”
Netflix co-CEO Ted Sarandos said that the “vast majority” of Netflix content is expected to be available at launch. “We will clear some additional content, but certainly not all of it,” he added.
As for pricing, Peters said the options were still being developed.
“While we are thinking about the right pricing model, we also want to keep it as simple as we can from a consumer-facing perspective,” he said.
But they also warned that it will take “years” for the company to really develop its advertising experience.
“Its what we call the crawl, walk, run model,” Peters said.
Executives also detailed the exclusive global advertising partnership with Microsoft, noting that the deal is exclusive, and that Microsoft’s flexibility and commitment to privacy were key drivers of the pact.
Netflix surprised Wall Street when co-CEO Reed Hastings unveiled the ad plan on the company’s last quarterly earnings call.
“Those who have followed Netflix know that I have been against the complexity of advertising, and a big fan of the simplicity of subscription,” Hastings said at the time. “But as much as I am a fan of that, I am a bigger fan of consumer choice. And allowing consumers who would like to have a lower price, and are advertising-tolerant, get what they want, makes a lot of sense.”
Then earlier this month, after a bake-off that included Google, Comcast, The Trade Desk and other video advertising giants, Netflix selected Microsoft as its global ad sales and technology partner.
A source familiar with the deal pegged a few reasons for why Netflix partnered with Microsoft, including its commitment to privacy, its willingness and ability to iterate quickly — “our advertising business in a few years will likely look quite different than what it looks like on day one,” the company said in its latest letter to shareholders — and the fact that Microsoft does not operate a competing streaming service.