Netflix Inc. NFLX has subtly thrown shade at Amazon.com Inc. AMZN as the latter prepares to introduce ads on its Prime Video platform, posing a new challenge to Netflix’s advertising revenue.
What Happened: During the fourth-quarter earnings call, Netflix Co-CEO Greg Peters was asked about the company’s strategy in light of Amazon’s move. He explained that Netflix had considered making ads the default option but decided against it, reported Business Insider. Peters also noted that 40% of Netflix’s new signups are for the ad tier.
“We did consider making it the default option, but given our long history of not having ads, we thought it was better for our members — rather than force them into a change and give them ads — better to attract them to the ads plan for the ones that wanted it, with the benefits,” Peters said.
Despite Amazon’s scale advantage, Peters emphasized Netflix’s strong position in the streaming market, attributing it to the company’s extensive content library and highly engaged audience.
Amazon is set to launch ads on Prime Video starting Jan. 29, potentially competing with Netflix for advertising revenue. Amazon’s default ad option will be available to its 115 million monthly users, significantly more than Netflix’s 23 million users for its ad tier.
Why It Matters: Netflix’s response to Amazon’s ad strategy comes amid the streaming giant’s efforts to boost its subscriber base and revenue. Earlier this month, Netflix was reportedly testing a collaborative initiative with French retailer Carrefour S.A. to attract more customers to its most affordable subscription, mirroring a strategy employed by Amazon to enhance its streaming service clientele.
Additionally, Netflix has hinted at further price hikes in the near future, as it looks to monetize the platform further. This follows a price hike in October, with the potential for more increases to come.
Despite these challenges, Netflix reported a strong fourth-quarter revenue of $8.83 billion, up 12.5% year-over-year, and added 13.12 million net paid subscribers, beating expectations.
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