Netflix had a tough beginning to 2022, with its first-ever decline in paid subscribers. However, it ended the year on a high note. The streamer gained 7.7 million paid subscribers in the fourth quarter, which was well above expectations. Additionally, its revenue grew in line with forecasts. While there are still doubts about whether its move into ad-supported media will be successful, Netflix is off to a good start.
During the call with analysts, executives compared its fledgling advertising bets to those of Hulu, which has a 10-year head start in the game. About half of Hulu’s membership is now on such a plan, generating billions in revenue and making the platform dominant in the connected TV space.
“I just want to emphasize, it’s a multi-year path,” said Netflix Chief Financial Officer Spencer Neumann of the ad-supported tier during the analyst call. “We’re not going to be larger than Hulu in year one.”
Netflix’s partnership with Microsoft has been successful in quickly and smoothly launching the ad-supported tier. User engagement is similar to the ad-free package, indicating that commercials are not turning off those who sign up.
Netflix’s strategy has been to limit commercial time to a few minutes per hour, in order to avoid overwhelming users with advertisements. Some of the first brands to test the service are AB InBev, L’Oreal Paris and NYX Professional Makeup.
