Netflix hits 40 million active users for ad tier, putting it closer to the big leagues for advertisers

By Bill Peters

Over 70% of Netflix's ad-supported members watch more than 10 hours a month, streaming platform says

Netflix Inc. on Wednesday reported a big jump in demand for its streaming-with-ads plan, as it tries to pull ahead of an industry navigating growing online consumption and increasingly attempts to lure viewers and advertisers from cable TV.

The streaming platform announced the news during TV's upfronts, the industry ritual during which network and media executives try to court advertisers. Some analysts on Wednesday said the increase suggested Netflix (NFLX) was getting too big to be ignored by bigger brands.

Netflix said its cheaper plan, which displays commercials during shows and movies, now has 40 million global monthly active users. That's well up from 5 million a year ago, and 23 million in January. The ad-supported tier costs $6.99 a month, compared to $15.49 for Netflix's standard, ad-free tier.

Evercore ISI analysts said Netflix's ad plan was "clearly on a path" to surpass 50 million active viewers by the end of this year. That meant "real scale" for the platform, they said.

"And based on our discussions with advertisers over the last year, it's when Netflix crosses the 50MM threshold that it becomes a key part (almost a must-buy) of brand advertisers' marketing budgets, given Netflix's already very high frequency, reliable brand and global reach," they continued.

Amid that jump, Netflix also said it would launch an in-house advertising-technology platform by the end of next year. Netflix said that bringing its advertising technology in-house would give advertisers new ways to buy ads and new ways to gauge their effectiveness.

More: Netflix buys NFL Christmas Day games. The streamer may raise prices as a result, expert says.

The company also said that this summer, it would expand its buying capabilities to include advertising and marketing platforms The Trade Desk , Google's Display & Video 360, and Magnite. Those companies will join Microsoft Corp. (MSFT) as the main programmatic partners for advertisers, Netflix said.

Netflix in 2022 announced that it had chosen Microsoft as its partner to support the buildout of the streaming platform's ad-supported plans.

Over 70% of Netflix's ad-supported users watch more than 10 hours a month, the company said. Netflix reported in April that it has about 270 million total subscribers.

And as the streaming services clamor for more live sports coverage - a lifeline for the cable TV industry - Netflix also said that for the first time, it would broadcast two NFL games on Christmas Day. The company said it would broadcast at least one Christmas game in 2025 and in 2026. The coverage could increase viewership - and prices - on the streaming platform.

BMO analysts on Wednesday said they believed the effort to land NFL broadcasts "suggests that live sports will be a key tenant to the overall strategy in the coming years ... and should prove incremental to overall engagement."

Shares of Netflix closed down fractionally on Wednesday. The stock has surged 83.8% higher over the past 12 months.

Also read: Here's everything we know so far about Comcast's new Peacock-Apple-Netflix bundle

-Bill Peters

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05-15-24 1842ET

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