Netflix co-CEO and chairman Reed Hastings conceded that he wished the streamer had introduced an ad-supported plan years ago.
Netflix’s reluctance to adopt advertising was “wrong” and that it was a mistake to not jump into the segment several years ago, said Hastings, speaking Wednesday at the New York Times’ DealBook Summit in New York. But the company eventually came around to the idea, and Hastings called the rollout of Netflix with ads this fall a “good tactic, because we get to offer consumers lower prices.”
“I have two religions: customer satisfaction and operating income,” he said. “Everything else is a tactic.”
In responding to interviewer Andrew Ross Sorkin of the Times, Hastings said, “You’re right to say I didn’t believe in the ad-supported tactic for us. And I was wrong about that.” Hastings credited Hulu and founding CEO Jason Kilar (also former chief exec of WarnerMedia) for demonstrating success with advertising in premium video: “Hulu really proved that you could do that at scale and offer consumers lower prices, and that that was a better model.”
Hastings added, “I wish we had flipped a few years earlier on it, but we’ll catch up and in a couple of years we won’t remember when we started it.”
Hastings previously had rejected the notion that Netflix would introduce advertising into its video service. “We’ve got a much simpler business model, which is just focused on streaming and customer pleasure,” he said in 2020 at an investment conference, adding that the company was “strategically disadvantaged” in online advertising against Google, meta and Amazon.
Netflix Basic With Ads launched in the U.S. on Nov. 3, priced 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 serve advertising — is available in 12 countries: Australia, Brazil, Canada, France, Germany, Italy, Japan, Mexico, South Korea, Spain, the U.K. and the U.S.
For the fourth quarter, Netflix doesn’t expect the ad-supported service to have a “material” contribution to earningsbut longer-term is “very optimistic about our new advertising business.”
Regarding Netflix’s limited theatrical release of “Glass Onion: A Knives Out Mystery,” Hastings said that was a “promotional tactic” to build buzz and drive subscriber signups — and that the company would consider doing similar releases in the future. “We are not trying to build a theatrical business,” he said. “We are trying to break through the noise.”
Hastings added that Netflix left “a lot” of money on the table with the limited theatrical release of director Rian Johnson’s “Glass Onion,” starring Daniel Craig reprising 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 at about 600 theaters. After the one-week run in theaters, “Glass Onion” will hit Netflix’s streaming service on Dec. 23.
Netflix, facing a slew of new streaming competitors, lost 1.7 million subscribers in the first half of 2022 — the first time in more than a decade its customer base had shrunk. The company bounced back in the third quarter with a gain of 2.41 million net paid subscribers to stand at 223.1 million worldwide as of the end of September.
“It’s become a brawl now in the streaming of premium content,” Hastings said at the DealBook conference.
Meanwhile, Hastings was asked his thoughts about Elon Musk’s $44 billion takeover of Twitter. The Netflix exec responded with a glowing appraisal: “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 his endeavors,” and added that he was “excited” about Musk’s Twitter acquisition.
Musk “just spent all this money for democracy and society to have a more open platform — and I am sympathetic to that,” Hastings said.
In the wide-ranging DealBook interview, Hastings also defended Netflix’s decision to stand behind comedian Dave Chappelle’s “The Closer” stand-up special, despite a backlash among employees who objected to transphobic and homophobic comments in the special. The Chappelle special “was one of the most entertaining specials we’ve ever had,” Hastings said. “We would do it again and again.”
