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2022-10-15

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Netflix's New Ad Tier Gets Mixed Reactions. Now the Focus Is on Earnings

Netflix is getting a generally bullish reaction from Wall Street analysts to its new advertising str

Netflix's New Ad Tier Gets Mixed Reactions. Now the Focus Is on Earnings

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Now the Focus Is on Earnings","url":"https://stock-news.laohu8.com/highlight/detail?id=2275959422","media":"Barron's","summary":"Netflix is getting a generally bullish reaction from Wall Street analysts to its new advertising str","content":"<html><head></head><body><p>Netflix is getting a generally bullish reaction from Wall Street analysts to its new advertising strategy. Bulls see the addition of an ad-supported subscription tier boosting revenue, although skeptics think the specifics of the new plan will make it unappealing to most viewers.</p><p>Before we get into the details of the debate, let&#39;s take a minute to consider what a breathtaking change of direction this is for the world&#39;s leading subscription-based video-streaming service.</p><p>While analysts and investors pressed Netflix (ticker: NFLX) CEO Reed Hastings for years on the company&#39;s choice not to sell advertising, he emphatically made the case that both viewers and the business were better off with a pure subscription model. Ads were likely to make the Netflix experience worse. he argued.</p><p>In early 2020, just before the pandemic, Hastings was asked for the umpteenth time about why Netflix wasn&#39;t selling ads. He said it would be difficult for the company to compete in the market for digital advertising with Google, Facebook and Amazon.com.</p><p>To create a $5 billion or $10 billion ad business, Netflix would have to &#34;rip that away&#34; from the other platforms, he said, arguing that making money in advertising over the long term would be a battle.</p><p>&#34;We&#39;ve got a much simpler business model which is just focused on streaming and customer pleasure,&#34; Hastings said. &#34;We think with our model that we will actually get to a larger revenue, a larger profit, larger market cap, because we don&#39;t have the exposure to something that we&#39;re strategically disadvantaged at, which is online advertising against those big three.&#34;</p><p>Well, of course, that was then, and this is now.</p><p>Netflix&#39;s subscriber numbers soared during the pandemic, but they have since come back to Earth. Subscribership fell during both of the past two quarters. The March quarter numbers were so shockingly bad -- the company lost 200,000 subscribers after projecting 2.5 million net additions -- that Hastings said on the earnings call that Netflix was considering adding ad-supported service, but that it would be phased in over several years.</p><p>As it turned out, it took just six months for the company to dream up an advertising strategy. The company will offer the new &#34;Basic with Ads&#34; subscription tier to U.S. customers starting Nov. 3 at $6.99 a month, three bucks below the current bare-bones Basic plan. Netflix said it would include 4 to 5 minutes an hour of 15- and 30-seconds ads, both before and during movies and television programs.</p><p>Subscribers to the plan will be limited to a single device at a time and won&#39;t be able to download shows for offline viewing. For licensing reasons, some unspecified content won&#39;t be available on the advertising tier.</p><p>Wall Street is generally supportive of the Netflix strategy, and likewise thinks that the company&#39;s third-quarter earnings report, due on Tuesday, should show some improvement from the June quarter. For the quarter, Netflix has projected revenue of $7.84 billion, up 4.7% from a year ago, with profits of $2.14 a share.</p><p>The company expects to add one million net new subscribers in the quarter, which would boost the total to 221.7 million. While Wall Street&#39;s consensus estimates are in line with management&#39;s guidance on both revenue and profits, analysts expect 1.1 million net new subscribers as the addition of 1.8 million international accounts is offset by a loss of about 700,000 in the U.S.</p><p>UBS analyst John Hodulik on Friday lifted his target price on Netflix shares to $250, from $198, but kept his Neutral rating on the stock. He has some doubts about demand for the ad-based service.</p><p>While he says the ad-supported tier will add to both revenue and profitability -- he sees an eventual 10% boost to revenue -- that will take some time. The single-stream plan unveiled Thursday will have limited appeal, Hodulik says, though he believes the company could eventually offer additional ad tiers with more features.</p><p>Rosenblatt Securities analyst Barton Crockett likewise has doubts about the appeal of the new plan. &#34;The most powerful force in subscriptions is inertia, and a need to switch will greatly limit the number of users of Netflix&#39;s Basic with Ads,&#34; he wrote. &#34;We see limited consumer interest in Netflix&#39;s 1 stream plan, since most houses have over 2 people and multiple streaming devices.&#34;</p><p>He kept his Neutral rating on the stock.</p><p>Benchmark analyst Matthew Harrigan, who kept a Sell rating and $157 target price on the stock, thinks that the medium-term risks in the stock are &#34;geared to the downside.&#34; Among other things, he said the timing for a new advertising platform &#34;is not favorable&#34; given the weak consumer economy. The lack of sports programming could be an issue for the Netflix ad strategy, he said, suggesting that some advertisers could be &#34;repelled&#34; by shows such as Squid Game and a new series about the serial killer Jeffrey Dahmer.</p><p>Evercore ISI analyst Mark Mahaney, who rates the stock at Outperform, is more upbeat. The addition of an advertising tier is &#34;the biggest catalyst across the internet sector&#34; and will &#34;materially boost the value of Netflix to consumers,&#34; reduce churn and expand gross subscriber additions, he said in a research note.</p><p>And the benefits of offering ads aren&#39;t reflected in current Wall Street forecasts for Netflix&#39;s financial performance or in the stock&#39;s valuation, Mahaney wrote. He kept his target of $300 for Netflix&#39;s stock price.</p><p>Netflix shares fell 1.1% to $230 on Friday.</p></body></html>","source":"lsy1610680873436","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Netflix's New Ad Tier Gets Mixed Reactions. 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Now the Focus Is on Earnings\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-10-15 10:02 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.barrons.com/articles/netflix-ads-earnings-51665770684?mod=hp_LATEST><strong>Barron's</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Netflix is getting a generally bullish reaction from Wall Street analysts to its new advertising strategy. Bulls see the addition of an ad-supported subscription tier boosting revenue, although ...</p>\n\n<a href=\"https://www.barrons.com/articles/netflix-ads-earnings-51665770684?mod=hp_LATEST\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://www.barrons.com/articles/netflix-ads-earnings-51665770684?mod=hp_LATEST","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"2275959422","content_text":"Netflix is getting a generally bullish reaction from Wall Street analysts to its new advertising strategy. Bulls see the addition of an ad-supported subscription tier boosting revenue, although skeptics think the specifics of the new plan will make it unappealing to most viewers.Before we get into the details of the debate, let's take a minute to consider what a breathtaking change of direction this is for the world's leading subscription-based video-streaming service.While analysts and investors pressed Netflix (ticker: NFLX) CEO Reed Hastings for years on the company's choice not to sell advertising, he emphatically made the case that both viewers and the business were better off with a pure subscription model. Ads were likely to make the Netflix experience worse. he argued.In early 2020, just before the pandemic, Hastings was asked for the umpteenth time about why Netflix wasn't selling ads. He said it would be difficult for the company to compete in the market for digital advertising with Google, Facebook and Amazon.com.To create a $5 billion or $10 billion ad business, Netflix would have to \"rip that away\" from the other platforms, he said, arguing that making money in advertising over the long term would be a battle.\"We've got a much simpler business model which is just focused on streaming and customer pleasure,\" Hastings said. \"We think with our model that we will actually get to a larger revenue, a larger profit, larger market cap, because we don't have the exposure to something that we're strategically disadvantaged at, which is online advertising against those big three.\"Well, of course, that was then, and this is now.Netflix's subscriber numbers soared during the pandemic, but they have since come back to Earth. Subscribership fell during both of the past two quarters. The March quarter numbers were so shockingly bad -- the company lost 200,000 subscribers after projecting 2.5 million net additions -- that Hastings said on the earnings call that Netflix was considering adding ad-supported service, but that it would be phased in over several years.As it turned out, it took just six months for the company to dream up an advertising strategy. The company will offer the new \"Basic with Ads\" subscription tier to U.S. customers starting Nov. 3 at $6.99 a month, three bucks below the current bare-bones Basic plan. Netflix said it would include 4 to 5 minutes an hour of 15- and 30-seconds ads, both before and during movies and television programs.Subscribers to the plan will be limited to a single device at a time and won't be able to download shows for offline viewing. For licensing reasons, some unspecified content won't be available on the advertising tier.Wall Street is generally supportive of the Netflix strategy, and likewise thinks that the company's third-quarter earnings report, due on Tuesday, should show some improvement from the June quarter. For the quarter, Netflix has projected revenue of $7.84 billion, up 4.7% from a year ago, with profits of $2.14 a share.The company expects to add one million net new subscribers in the quarter, which would boost the total to 221.7 million. While Wall Street's consensus estimates are in line with management's guidance on both revenue and profits, analysts expect 1.1 million net new subscribers as the addition of 1.8 million international accounts is offset by a loss of about 700,000 in the U.S.UBS analyst John Hodulik on Friday lifted his target price on Netflix shares to $250, from $198, but kept his Neutral rating on the stock. He has some doubts about demand for the ad-based service.While he says the ad-supported tier will add to both revenue and profitability -- he sees an eventual 10% boost to revenue -- that will take some time. The single-stream plan unveiled Thursday will have limited appeal, Hodulik says, though he believes the company could eventually offer additional ad tiers with more features.Rosenblatt Securities analyst Barton Crockett likewise has doubts about the appeal of the new plan. \"The most powerful force in subscriptions is inertia, and a need to switch will greatly limit the number of users of Netflix's Basic with Ads,\" he wrote. \"We see limited consumer interest in Netflix's 1 stream plan, since most houses have over 2 people and multiple streaming devices.\"He kept his Neutral rating on the stock.Benchmark analyst Matthew Harrigan, who kept a Sell rating and $157 target price on the stock, thinks that the medium-term risks in the stock are \"geared to the downside.\" Among other things, he said the timing for a new advertising platform \"is not favorable\" given the weak consumer economy. The lack of sports programming could be an issue for the Netflix ad strategy, he said, suggesting that some advertisers could be \"repelled\" by shows such as Squid Game and a new series about the serial killer Jeffrey Dahmer.Evercore ISI analyst Mark Mahaney, who rates the stock at Outperform, is more upbeat. The addition of an advertising tier is \"the biggest catalyst across the internet sector\" and will \"materially boost the value of Netflix to consumers,\" reduce churn and expand gross subscriber additions, he said in a research note.And the benefits of offering ads aren't reflected in current Wall Street forecasts for Netflix's financial performance or in the stock's valuation, Mahaney wrote. He kept his target of $300 for Netflix's stock price.Netflix shares fell 1.1% to $230 on Friday.","news_type":1},"isVote":1,"tweetType":1,"viewCount":405,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"upFlag":false,"length":4,"xxTargetLangEnum":"ORIG"},"commentList":[{"id":104362491,"gmtCreate":1665846375025,"gmtModify":1665846378729,"authorId":4124852239976342,"author":{"id":4124852239976342,"authorId":4124852239976342,"name":"SMingzz","avatar":"https://community-static.tradeup.com/news/default-avatar.jpg","vip":1,"crmLevel":3,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9989032131,"type":1,"supId":0,"prevId":0,"content":"<span class=\"s1\">K</span>","text":"<span class=\"s1\">K</span>","html":"<span class=\"s1\">K</span>","likeSize":0,"commentSize":0,"subComments":[],"verified":10,"allocateAmount":0,"commentType":"invalid","coins":0,"score":0}],"hasMoreComment":true,"orderType":2}