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Netflix’s Reed Hastings admits he was wrong about the ad

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.” But the company eventually got around to the idea, and Hastings called rolling out Netflix with ads “a good tactic, because we offer consumers lower prices.”

“I have two religions: customer satisfaction and operating income,” he said. “Everything else is a tactic.”

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, 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 have rights to display ads – is available in 12 countries: Australia, Brazil, Canada, France, Germany, Italy, Japan, Mexico, South Korea, Spain, the United Kingdom and the United States

For the fourth quarter, Netflix doesn’t expect ad-supported plans to have a “substantial” contribution to revenue, but over the long term, it’s “very optimistic about our new advertising business.”

Regarding Netflix’s limited theatrical release of “Glass Onion” was a “promotional tactic” to increase streaming subscribers and that the company would consider other 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,” the sequel to “Knives Out” starring Daniel Craig.

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.

“He just spent all this money for democracy and society to have a more open platform – and I sympathize with that,” Hastings said.

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