Netflix plans for an advertising-supported subscription tier to be running in early 2023, first testing in a handful of markets, then opening to the rest of the world.
The streaming platform is looking at years to fine tune the model but, initially, it will be testing in more sophisticated advertising markets (could Australia be in that rollout?).
“We're going to take an iterative approach,” says Greg Peters, chief operating officer and chief product officer. “This is what we call the Crawl, Walk, Run model.”
Early discussions with brands and advertising agencies show they want to connect with the content, Peters told an earnings call after the release of June quarter results which showed a second quarter of subscription falls.
He saw a high degree of alignment with advertising frequency caps. “That enthusiasm, that alignment, is increasing my optimism and the excitement that I've got to basically get this out there … it's going to be a win-win-win for all parties involved.”
Peters says the company is taking an innovation-oriented view, part of the Netflix DNA.
He wants “an incredible experience” for those who choose to take the ad-supported offering but also the same for brands and advertisers.
“I'm pretty optimistic that over a couple of years, we can deliver an experience which is fundamentally different from the ad experience on linear in a way that supports all of the stakeholders,” he says.
On pricing, he wants to keep it as simple as possible from a consumer facing perspective.
“So in terms of the on-ramp, the planned selection, how upsells happen, we want to work those flows iteratively over time, so we build into that complexity without making it overwhelming for consumers,” he says.
He says Netflix is launching first in the countries that have more "mature" advertising markets.
“But I would say the initial response that we're getting from a brand and advertiser perspective is quite strong,” he says.
“We feel quite confident that as we grow into this and we have more subscribers overtime on these plans, that at least initially the unit economics are quite good.
“We don't sort of see this building in that… CPM side so much more is that we're actually building the total amount of volume on those plans and then the total amount of revenue.
“This is going to start small relative to our total revenue mix, but we think we can grow it to be substantial over a period of time.”
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