Yahoo Finance Netflix 'open' to exploring free ad-supported service after November ad-tier launch
Could a free, ad-supported streaming service come to Netflix (NFLX)? Maybe.
"We are keeping an eye on that segment for sure," co-CEO Ted Sarandos told investors during the company's fourth quarter earnings call. "We're open to all these different models that are out there right now."
Still, the executive cautioned the company has a lot on its plate this year between its crackdown on password sharing and a recently launched ad-supported tier, so any foray into the FAST — or Free Ad-Supported Television — category would not be until a later date.
In regards to Netflix's ad tier, which officially debuted in November, executives offered an update on how the rollout is going so far, although specifics were light given the recent launch.
Newly minted co-CEO Greg Peters revealed the tech is all working, the product experience is good, and the engagement is comparable to the ad-free plan, but that there is still a "long list of experience improvements" the company would like to tackle in order to better the product over time.
Furthermore, the executive added the take rate has been solid due to its lower price point of $6.99 in the U.S. and, despite Wall Street's fears, the company has not seen consumers trade down from premium plans.
In its shareholder letter, Netflix said engagement for ad-supported subscribers "is consistent with members on comparable ad-free plans, is better than what we had expected and we believe the lower price point is driving incremental membership growth."
Netflix went as far as to say its ad business could be even larger than Hulu's, with CFO Spencer Neumann telling investors: "It's a multiyear path. We're not going to be larger than Hulu in year one, but, hopefully, over the next several years, we can be at least as large."
"We wouldn't be getting into this business [if] it couldn't be a meaningful portion of our business," Neumann added, noting the goal is for advertising to "be bigger than at least 10% of our revenue and hopefully much more over time."
Netflix stock rose as much as 7% following the company's fourth quarter earnings results on Thursday, as subscriber additions came in at 7.66 million, above company guidance for 4.5 million.
If these gains hold during Friday's trading session, the stock will have more than doubled from its May 2022 low of $166.37 a share.
The company reported revenue and earnings per share for the fourth quarter that were light of estimates, as revenue totaled $7.85 billion against forecasts for $7.86 billion, while earnings per share came in at $0.12 against $0.58 expected.
For the current quarter, Netflix expects revenues will total $8.17 billion with earnings per share forecast to total $2.82. Netflix no longer offers subscriber growth forecasts.
The company also announced co-CEO and co-founder Reed Hastings would step down from his role leading the company, with COO Greg Peters will join current Netflix co-CEO Ted Sarandos in that role. Hastings will now serve as the company's executive chairman.
Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com
Click here for the latest trending stock tickers of the Yahoo Finance platform
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for Apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube
