Netflix Execs Don’t Expect Subscriber Shift From Ad-Free To Ad-Supported Tier Despite Cheaper Price

deadline.com:

In a third-quarter earnings interview dominated by talk of advertising, top Netflix execs described it as a “sprint” to capture “a whole new audience” and a bid to woo advertisers affected by “the collapse of linear television.” COO Greg Peters, who is leading the ad push, was asked by moderator and J.P.

Morgan analyst Doug Anmuth about whether many subscribers to the ad-free tier would trade down to the ad-supported one. Any resulting loss of subscriber revenue could offset gains from advertising.

The new Basic with Ads plan will cost $6.99 a month, compared with $15.49 for the most popular ad-free plan. “We don’t see a lot of members switching plans,” Peters said. “Oftentimes, when they come in for a specific feature, let’s say 4K resolution, we see that to be a fairly sticky choice.” If those patterns hold true in the new advertising phase, he added, the company anticipates “unit economics being neutral to positive.” The cheapest plan has certain limitations — only one stream at a time, no downloading 720p resolution (compared with 1080p for the most popular plan).

The remarks came after Netflix reported better-than-expected results for the third quarter, including the addition of some 2.4 million subscribers, more than double what Wall Street expected.