Despite the Basic With Ads subscription tier being released just two weeks ago, we’re forecasting Netflix will see US ad revenues of $830 million in 2023, growing to $1.02 billion in 2024. It’s an impressive acceleration in ad revenues, but it puts the company behind a few streaming rivals.
The competition: According to our forecast, Disney+, which is set to launch its ad-supported tier on December 8, will have slightly higher US revenues next year at $1.02 billion, growing to $1.19 billion in 2024. The Walt Disney Co. already had an ad infrastructure through Hulu and ESPN+, while Netflix had to build one from scratch.
Hulu will see $4.25 billion in US ad revenues in 2023, further evidence of the ad revenue opportunity for Netflix if the company can capitalize on it.
Netflix is still in flux: The platform needs to sell brands on advertising without detracting too much from its subscription revenues.
Basic with confidence: Netflix knows advertiser interest is high, so the platform is trying to make advertising competitive on its service.
What will work for advertisers? While ad effectiveness can’t yet be measured, there’s no reason to think an ad platform that is available to 50% of the US—and could attract more potential subscribers—will fail. Still, Netflix is threading the line between driving revenues and driving away viewers.
Consumers think higher of the leading subscription service ad loads than of on-demand or live TV. And in some ways, streamers like Hulu and Peacock have already primed Netflix viewers for seeing ads in streaming.
The other side: Not everything about Netflix Basic With Ads is rosy. The new service doesn’t offer all TV shows and movies. And it doesn’t work well with Chromecast. On the other hand, kids’ profiles are ad-free, which will certainly appeal to cost-conscious but ad-averse parents.
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