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Netflix Co-CEO Greg Peters says the company once contemplated an advertising strategy similar to the one used by Amazon, which starting this month is making subscribers pay extra in order to avoid ads.
In the end, though, Peters said the executive team concluded that the approach would put an undue burden on subscribers.
“We did consider making advertising the default option,” Peters said in response to a Wall Street analyst’s question on the company’s fourth-quarter earnings call. “But given our long history of not having ads, we thought it was better for members, rather than forcing them into a change and get them mad.”
The decision was ultimately made to try to incentivize existing customers rather than penalize some of them with extra fees. Prime Video, which Peters did not name in his answer, requires customers to pay $3 a month extra to not see any ads on original programming. Netflix concluded it was “better to attract them to the advertising plan … based on the benefits: more streams, higher-resolution downloads and, of course, lower price,” Peters said. A bit more than a year since launch, he continued, “that approach is generally working well for our members and we haven’t seen any big backlash, which is a positive as well.”
Another element that factored into Netflix’s strategy is the size of the market opportunity, which Peters estimated at more than $25 billion in connected-TV ad spending. “There’s room for multiple players, clearly,” he said. “When we think about how we compete for some of that spending, I think we need to play to our strengths,” mainly emphasizing original film and TV programming as well as a growing portfolio of video games.
Peters spoke after the company reported strong fourth-quarter results, including a better-than-expected gain of 13 million global subscribers, to more than 260 million.
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