Netflix Says It Will Stay Ad-Free Despite Missing Growth Targets

July 30, 2018 Los Gatos / CA / USA - Netflix logo in front of their headquarters situated in Silicon Valley; south San Francisco bay area
B&T Magazine
By B&T Magazine



Netflix has labelled reports it is pondering an ad-supported model as ‘false’ in a letter to shareholders.

But the denial comes amidst troubling times for the streaming giant, which lost 126,000 paid customers in the US and missed global growth targets during the last quarter.

“We, like HBO, are advertising free,” said Netflix CEO Reed Hasting.

“That remains a deep part of our brand proposition; when you read speculation that we are moving into selling advertising, be confident that this is false.

“We believe we will have a more valuable business in the long term by staying out of competing for ad revenue and instead entirely focusing on competing for viewer satisfaction.”

Netflix’s resistance to make the change comes after one analyst reported the company could stand to make an additional $US1 billion ($AU1.42bn) per year by introducing ads.

And the potential extra revenue could come in handy for the streaming service if the latest quarterly earnings are anything to go by.

Netflix expected to add 5 million subscribers in the second quarter of 2019 but didn’t even come close, adding only 2.7 million.

“We think Q2’s content slate drove less growth in paid net adds than we anticipated,” said Hasting.

Despite a relatively poor quarter, Hasting and his team remain bullish about the future, predicting it will add 7 million new subscribers in the next quarter thanks to the  new season of Stranger Things and original films from Martin Scorsese and Michael Bay.

This will be met with the loss of classic sitcoms Friends and The Office to competing streaming services.

But the growing competition in the streaming space, particularly the introduction of services from leading brands like Disney and Apple, doesn’t seem to concern Netflix.

“The competition for winning consumers’ relaxation time is fierce for all companies and great for consumers,” said hasting.

“The innovation of streaming services is also drawing consumers to shift more and more from linear television to streaming entertainment.”




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