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Netflix CEO Reed Hastings Admits he Overlooked the Value of Advertising

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Reed Hastings, the founder and co-CEO of streaming behemoth Netflix, recognized the significance of advertising in generating money for the firm.

According to Hastings, he wishes the firm provided advertising in its services earlier. However, he stated that he grew too focused on the intense rivalry from other market giants such as Facebook and Google.

For many years, Netflix shunned the concept of commercial bundles. However, the firm went through financial difficulties many months ago. This encouraged management to look for alternative methods to make money.

“I didn’t believe in the ad-supported tactic for us. I was wrong about that. Hulu proved you could do that at scale and offer customers lower prices. So we did switch on that. I wish we had flipped a few years earlier on that, but we’ll catch up,” Hastings said.

“After a challenging first half, we believe we’re on a path to reaccelerate growth. The key is pleasing members. It’s why we’ve always focused on winning the competition for viewing every day. When our series and movies excite our members, they tell their friends, and then more people watch, join and stay with us,” the company said months ago.

As a response, Hastings rolled out a new subscriber plan with an ad-free option for $6.99 per month. Users who wish to prevent ad interruptions while streaming must pay extra. This is a technique the corporation employs following its enormous loss of members over the years.

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Hastings wants to explore advertising

Hastings confessed that Netflix devised an advertising strategy to attract more members. However, he claimed that he overlooked essential elements many businesses currently employ.

For example, Warner Bros, HBO Max, Paramount, Disney, and Hulu have previously introduced cheaper ad-supported subscriptions to their members.

According to individual reports, the strategies provided corporations with more significant opportunities to generate more money. Increased revenues aided businesses in meeting rising employee and economic expectations.

“Our challenge and opportunity are to accelerate our revenue and membership growth by improving our product, content, and marketing as we’ve done for the last 25 years and better monetize our big audience. We’re in a position of strength given our $30 billion-plus in revenue, $6 billion in operating profit last year, growing free cash flow and a strong balance sheet,” said Netflix in April.

“The big thing that I missed is I was on the Facebook board, so I bought in for a decade to the belief that systems relying on data were going to be able to do higher CPMs than anyone else,” Hastings said.

“So Google and Facebook were going to mop up the world — and they have in non-TV advertising,” he added.

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Exploring more revenue-generating projects

Netflix has also begun to expand its gaming division. The business announced the establishment of a game studio in Finland earlier this year.

This would increase the company’s investments in the gaming business. Amir Rahimi, Vice President of Game Studios, will oversee the studio’s operations. He expressed his faith in the initiative.

“This is another step in our vision to build a world-class games studio that will bring a variety of delightful and deeply engaging original games — with no ads and no in-app purchases — to our hundreds of millions of members around the world,” said Rahimi.

“It’s still early days. Creating a game can take years, so I’m proud to see how we’re steadily building the foundation of our games studios in our first year, and I look forward to sharing what we produce in the coming years,” he added.

Photo Credit: Ernesto S. Ruscio

Source: CNBC

Jeah Lorraine Adams has been a writer for the past two decades. She is also a mom of two.

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