Netflix seeks market favor with its ad-supported service to launch in early 2023 | Companies

The stock market gave Netflix a break yesterday. Its shares rose 7.35% yesterday after announcing on Tuesday that it would launch its cheaper, ad-supported plan in early 2023. Its aim is to attract more pocket-watching customers and thus help curb the decline in the number of subscribers, which continued. occur in the second trimester. Yes, the giant diffusion lost 970,000 subscribers between April and June, less than the two million it had forecast in the previous quarter, in part due to the premiere of the new season of the hit series Strange things.

Netflix soared more than 5% on Wednesday in the stock market after announcing on Tuesday that it plans to launch its cheapest and most advertised package in early 2023. customers who are looking more handheld and therefore helping to curb the decline in subscriber numbers, which continued into the second quarter. This, yes, the giant of diffusion, it lost 970,000 subscribers between April and June, less than the two million it had forecast in the previous quarter, thanks in part to the premiere of the new season of the hit series Strange things.

The company also said it expects to add about 1 million new subscribers in the third quarter, although in this case the figure is lower than the 1.8 million expected by Wall Street analysts.

Netflix told investors it was “confident and optimistic about the future”, but acknowledged that accelerating its growth again will be “a great challenge”. To achieve this, the company said it will likely start marketing the new plan in a handful of markets where ad spend is significant. “Like most of our new initiatives, our intention is to roll it out, listen and learn, and quickly improve the offering. So, in a few years, our advertising business will be very different from what it was on day one,” he added.

Netflix, which currently has 220.67 million subscribers, did not disclose the price of the ad-supported plan, but promises it will be better than the company’s most popular ad-free plan, which costs $15.49 per month in the US. In Spain, its basic package costs 7.99 euros; the standard, 12.99 euros, and the premium, 17.99.

The announcement comes a week after Netflix announced a partnership with Microsoft to be its exclusive advertising partner. COO and Chief Product Officer Greg Peters confirmed that, at least initially, ads on the platform will only be sold by the software giant. “Our hope is to create a better-than-linear-TV advertising model that’s more transparent and relevant to consumers and more effective for our advertising partners,” he said.

Wall Street analysts have said they’re confident Netflix’s advertising plan won’t cannibalize its current subscriber base. As John Blackledge of Cowen said, the company’s plan could add 4.3 million subscribers in the United States and Canada, and generate “a significant increase in revenue”.

The company has downplayed the possibility of higher costs with its ad-supported plan for payments to studios and content providers. Ted Sarandos, co-CEO and head of content at Netflix, acknowledged that the company is in discussions with some of its content providers over rights issues. And it is that, according to industry practice, this measure would be considered a second window event, which may result in certain payments, reported Variety.

Netflix chief financial officer Spencer Neumann added that they were in talks with outside partners, but told analysts they would be “disciplined”. Sarandos added that the platform’s original content will be available for the new subscription with ads, but the licensed content will not.

Netflix, which has seen its shares fall 63% so far this year, posted net profit of $1.4 billion (€1.37 billion) and revenue of 7.97 billion dollars in the second quarter of the year. The platform warned that the impact of the strengthening of the dollar had reduced its revenue by $339 million. Netflix derives nearly 60% of its revenue from outside the United States, so currency fluctuations have hit it particularly hard. The company’s earnings per share came in at $3.20, beating analysts’ expectations of $2.94.

Netflix, which last quarter blamed slowing growth on competition, account sharing and other factors such as slow economic growth and the war in Ukraine, said it now had “more time to understand these problems and find the best way to solve them”. .

Measures against account sharing

As part of its plans to drive growth, Netflix has announced that in 2023 it will launch a new payment plan for users who share an account. He assured that he will take serious action against the sharing of passwords, since he estimates that 100 million households use Netflix but do not pay for it.

The company clarified that from August 22 it will start testing a new modality in different countries with which it will charge additional fees to users who connect outside the home and connect to a TV.

“From August 22, 2022, to use your Netflix account in additional households, we will ask you if you want to add a household for an additional fee per month”, can we read in the Help Center in the section that corresponds to Honduras , one of the countries where the test will be carried out, along with Argentina.

In the Business Plans and Prices section, you can also see the price that people interested in this expansion will have to pay, which is an additional $2.99 ​​per month for each additional household in the case of Honduras and 219 pesos in the case of Argentine. .

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