Reed Hastings, co-CEO and chairman of Netflix, admitted that he wishes the operator had offered an ad-supported plan years ago.
Speaking Wednesday at the New York Times DealBook Summit in New York, Hastings said Netflix’s reluctance to embrace advertising was a “mistake” and that it would have been a mistake not to jump into the segment several years ago. But the company eventually got around to the idea, and Hastings called rolling out Netflix with ads this fall “a good tactic, because we’re offering consumers lower prices.”
“I have two religions: customer satisfaction and operating income,” he said. “Everything else is a tactic.”
Responding to interviewer Andrew Ross Sorkin of The Times, Hastings said, “You’re right in saying that I don’t believe in the ad-supported tactic for us. And I was wrong about that.” Hastings credited Hulu and former CEO Jason Keilar for proving their success with advertising in premium video: “Hulu has really proven that you can do this at scale and offer lower prices to consumers, and that was a better model.”
Hastings added, “I wish we had flipped a few years earlier, but we’ll catch up and in a couple of years we won’t remember when we started.”
Hastings had previously dismissed the idea that Netflix would insert ads into its video service. “We have a much simpler business model, which is just focused on streaming and customer enjoyment,” he said in 2020 at an investment conference, adding that the company was “strategically disadvantaged” in online advertising versus Google, Meta and Amazon.
Netflix Basic with ads launched in the US on November 3, at $6.99 per month (versus $9.99 for the regular Basic plan without ads). The ad-supported package – which excludes some popular TV series and movies for which Netflix does not currently have rights to display ads – is available in 12 countries: Australia, Brazil, Canada, France, Germany, Italy, Japan, Mexico, South Korea, Spain, UK and US
For the fourth quarter, Netflix doesn’t expect the ad-supported service to have a “substantial” contribution to earnings, but long-term it’s “very optimistic about our new ad business.”
Regarding Netflix’s limited theatrical release of “Glass Onion: A Knives Out Mystery,” Hastings said that this was a “promotional tactic” to get subscribers hype — and that the company would consider doing similar releases in the future. “We’re not trying to build a theatrical business,” he said. “We’re trying to cut through the noise.”
Hastings added that Netflix left “a lot” of money on the table with the limited theatrical release of Rian Johnson’s “Glass Onion,” starring Daniel Craig who reprized his role as Detective Benoit Blanc from the original Knives Out. Netflix earned an estimated $15 million at the box office over the Thanksgiving weekend in its release in about 600 theaters. After one week out in theaters, “Glass Onion” will hit the Netflix streaming service on December 23.
Netflix, facing a slew of streaming competitors, lost 1.7 million subscribers in the first half of 2022 — the first time its customer base has shrunk in more than a decade. The company rebounded in the third quarter with a gain of 2.41 million net subscribers, standing at 223.1 million subscribers worldwide through the end of September.
“It’s now a fray in premium content streaming,” Hastings said at the DealBook conference.
Meanwhile, Hastings was asked about his thoughts on Elon Musk’s $44 billion acquisition of Twitter. The Netflix exec responded with a rave review: “Elon Musk is the bravest, most creative person on the planet.” Hastings added that he is “100% convinced” that Musk is “trying to help the world in all of his endeavours,” and added that he is “excited” about Musk’s acquisition of Twitter.
“Musk has just spent all this money for democracy and society to have a more open platform – and I sympathize with that,” Hastings said.
In the wide-ranging DealBook interview, Hastings also defended Netflix’s decision to stand behind comedian Dave Chappelle’s The Closer special, despite a backlash among staffers who took issue with the special’s transphobic and anti-LGBT comments. Chappelle’s special, Hastings said, “was one of the most entertaining specials we’ve ever had”. “We will do it again and again.”
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