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Netflix’s Reed Hastings Credits Hulu for Advancing Ad-Supported SVOD Business Model

Netflix’s Reed Hastings Credits Hulu for Advancing Ad-Supported SVOD Business Model

Reed Hastings, co-founder and co-CEO of Netflix, now wishes the streamer had launched an ad-supported plan years ago. Speaking Nov. 30 at the New York Times’ Dealbook confab in New York City, Hastings said the service has two mantras: customer satisfaction and strong operating income. He said senior management (i.e., himself) failed to realize growing consumer demand for a lower-priced ad-supported plan.

“You’re right to say I didn’t believe in the ad-supported tactic for us,” he said. “And I was wrong about that.”

Netflix launched its ad-supported subscription streaming VOD plan on Nov. 3, less than six months after hastily announcing plans to reverse more than a decade of steadfastly refusing to sell commercials to subscribers in the form of a lower-priced service option.

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Hastings contends the proof that an ad-supported SVOD option could work was right in front of him all along. The executive said Hulu, which launched an ad-supported option on day one in 2007, proved that a streaming service could operate an AVOD service at scale, offering consumers lower prices, which would translate into a better overall business model.

In fact, it wasn’t until Netflix missed its first-quarter subscriber growth projection at the end of March this year that Hastings told investors about a plans to launch an AVOD tier in early 2023. With Disney planning to launch a lower priced ad-supported option for Disney+ on Dec. 8, Netflix expedited the launch of its plan.

“So we did switch on that, and credit to Hulu and [former CEO] Jason Kilar for figuring that out,” Hastings said, adding that he failed to see that larger percentages of the coveted 18-49-year-old demo were transitioning to connected televisions and away from linear TV — with advertisers in pursuit.

“We didn’t have to steal away the advertising revenue; in fact, it was pouring into connected TV,” he said. “And I wish we had flipped a few years earlier on it, but we’ll catch up, and in a couple of years we won’t remember when we started it.”

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