by Thinus Ferreira
Netflix plans to add ads for a new advertising-funded, cheaper tier which the global streaming service plans to roll out in early 2023, although co-CEO Ted Sarandos told investors on Tuesday night that some Netflix shows and content won't be available on this cheaper plan.
Netflix also predicts the end of linear TV within the next 5 to 10 years.
On Tuesday night in its second quarter results, Netflix announced that it lost another 970 000 subscribers, although its more than a million subscribers less than what it expected and predicted in its market forecast in April when it projected that it could likely lose another 2 million subscribers by the end of June.
Netflix now has 220.67 million subscribers worldwide and expects to add subscribers again during its third quarter of this year, predicting an addition of 1 million subscribers between July and the end of September this year.
Netflix lost subscribers in the United States and Canada during the quarter, and also saw subscribers losses across Africa, Europe and the Middle East. Netflix added 1000 subscribers in Latin America and 1.8 million subscribers in the Asia-Pacific region.
In Netflix's recorded investor's message for its second quarter results, CEO Ted Sarandos warned that not all Netflix content will be available to subscribers to opt for the cheaper ad-funded tier when it's launched globally.
The ad-funded Netflix tier will include all Netflix Original shows and content since Netflix owns that, but some other content licenced from American and other international studios and distributors will not be available on the cheaper plan.
"The vast majority of what people watch on Netflix we can include in the ad-supported tier today. Some things we're in conversations with studios on. We will clear some additional content. Not all of it," Ted Sarandos said.
Last week Netflix announced that it will be partnering with Microsoft as its technology and sales partner in launching an advertiser-funded tier with the aim of trying to curb churn and subscriber losses that stunned Hollywood and investors.
In its usual shareholder letter accompanying its quarterly results, Netflix said that Microsoft is "investing heavily to expand their multi-billion advertising business into premium television video, and we are thrilled to be working with such a strong global partner".
"We're excited by the opportunity given the combination of our very engaged audience and high-quality content, which we think will attract premium CPMs from brand advertisers."
"We'll likely start in a handful of markets where advertising spend is significant. Like most of our new initiatives, our intention is to roll it out, listen and learn, and iterate quickly to improve the offering. So, our advertising business in a few years will likely look quite different than what it looks like on day one."
"Over time, our hope is to create a better-than-linear-TV advertisement model that's more seamless and relevant for consumers. While it will take some time to grow our member base for the ad tier and the associated ad revenues, over the long run, we think advertising can enable substantial incremental membership (through lower prices) and profit growth (through ad revenues)," Netflix said.
"We've been through hard times before. We've built this company to be flexible and adaptable and this will be a great test for us and our high-performance culture."
"Were fortunate to be in a position of strength as the leader in streaming entertainment by all metrics (revenue, engagement, subscribers, profit and free cash flow). We're confident and optimistic about the future."
Netflix co-CEO Reed Hastings, in the earnings recording, predicted the end of traditional linear television within the next decade, saying "It's definitely the end of linear TV over the next 5 to 10 years".
Rival streamer Disney+, now also available in South Africa, also plans to roll out a cheaper ad-funded tier for subscribers within months.
