Executives at Netflix and its advertising partner Microsoft Corp. MSFT 0.09% has been meeting with ad buyers over the past few weeks to close deals ahead of a planned launch later this year.
Netflix’s subscriber base fell for the first time in nearly a decade, causing the stock to post its worst single-day percentage drop since 2004. WSJ’s Joe Flint walks us through three strategies the company may be trying to continue growing, and what the changes could mean for other streamers. CORRECTION: A previous version of this caption said Netflix’s stock has fallen to its lowest level since 2004.
In preliminary projections, Netflix told advertisers it expects to have 4.4 million unique viewers worldwide by the end of the year, including 1.1 million from the US. The company estimates that the number will grow to over 40 million by the third quarter of 2023. with 13.3 million from the US
Netflix’s forecasts for advertisers covered a dozen launch markets, including Brazil, Mexico, Japan, the UK, France, Germany, Korea, Spain, Italy, Australia and Canada.
The “Predicted Unique Viewers” metric shared by the company is expected to be higher than the number of subscribers for the ad-supported Netflix plan, as more than one person in a subscribed household is likely to be able to watch the service.
“We’re still in the early stages of deciding how to introduce a cheaper, ad-supported tier, and no decisions have been made yet,” a Netflix spokeswoman said in a statement.
The streaming company continues to evaluate potential demand for the ad-supported plan, and its projections for subscriptions and viewers could change over time, according to people familiar with the matter.
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Netflix, with 220 million subscribers, is betting that a lower-cost, ad-supported plan could attract new users and boost revenue as the company faces intensified competition and a maturing U.S. market.
The streaming giant lost nearly a million subscribers in the June quarter. It joins rivals like HBO Max and Disney+ that have or plan to launch ad-supported services.
Netflix’s foray into advertising is a major reversal for a company that has long said it would remain ad-free.
Netflix said in a July letter to shareholders that the new ad-supported option would likely start in early 2023, but it has told some ad buyers it would launch on November 1. The company is trying to charge brands premium prices for advertising its service, the Wall Street Journal previously reported.
Viewership forecasts have been distributed to some ad buying firms so they can advise their advertisers on the expected reach of the new service – a factor in determining spend.
Netflix is betting that a lower-cost, ad-supported plan could attract new users to its content, including survival drama series Squid Game.
Photo: Noh Juhan/Associated Press
The initial projection for unique viewers — around 40 million in about a year — is small compared to Netflix’s massive subscriber base, but would put the company on the map as a significant destination for online video ads. The pace of growth of Netflix’s service will depend in part on its price.
Advertiser demand to be part of the launch is expected to be robust, some ad buyers said. Netflix has been off-limits to advertisers for years and has the largest audience in the streaming industry.
Some ad buyers said they were unhappy with certain aspects of Netflix’s planned service, including the fact that there’s likely to be limited ability to choose where ads are shown.
Netflix also doesn’t initially plan to have an independent firm measure or verify that advertisers are getting the exposure they paid for.
—Jessica Toonkel contributed to this article.
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