TechDigits

Tech news
Monday, Feb 06, 2023

Netflix: $11.5bn wiped from streamer's stock market value as ad funded service gets off to bad start

Netflix: $11.5bn wiped from streamer's stock market value as ad funded service gets off to bad start

One might have thought, to judge from the acres of newsprint and hours of airtime devoted to its documentary about the Duke and Duchess of Sussex, that this would be a boom time for Netflix.
Not so.

Shares of the streaming giant fell by more than 8% this afternoon, wiping $11.5bn from its stock market value, on a report that its new advertising-funded service has got off to a poor start.

Digiday, a specialist publication that covers the digital media market, reported that audiences for the service have fallen short of the numbers that Netflix guaranteed advertisers.

It said, quoting five advertising agency executives, that audiences had only been around 80% of the numbers promised to advertisers in some cases and that, as a result, Netflix was offering them refunds on adverts yet to run.

Reporter Tim Peterson quoted one ad agency executive as saying: "They can't deliver. They don't have enough inventory to deliver. So they're literally giving the money back."

The article said that Netflix had been selling ads on a so-called 'pay on delivery' basis: in other words, advertisers only pay the company for viewers who actually watch their adverts.

It said that Netflix has been charging more, per numbers viewing adverts on its platform, than rival Disney+ - which briefly overtook Netflix earlier this year as the world's biggest streaming platform.

The company has been charging $65 for every 1,000 viewer impressions while Disney+ has been charging $50 for the same number. Digiday said that Netflix has since cut its price to $55.

The article added that, in some cases, advertisers had not been taking a refund but instead rolling over their ad spend to the first three months of next year in the hope that Netflix can build a bigger audience over time.

Other advertisers, though, have sought refunds so they can deploy their ad spend elsewhere during the crucial Christmas season.

The streaming wars

Netflix launched its new ad-funded service last month - seven months after first announcing it was thinking about the idea - in a bid to bolster its revenues.

The company shocked Wall Street when, in April, it announced it had suffered a fall in subscriber numbers during the first three months of the year.

The ad-supported service, which Netflix promised would carry just four to five minutes worth of advertising per hour, was launched in the US with a monthly subscription fee of $6.99.

Other streaming platforms, including Disney+, Hulu (which is jointly owned by Disney and Comcast, the parent company of Sky News) and HBO Max, which is owned by Warner Bros Discovery, are expected to charge more for their ad-funded services.

Wall Street is currently watching keenly to see whether Disney+ changes the price of its services more broadly following the dismissal last month of Bob Chapek, its former chief executive, who was replaced by his predecessor Bob Iger.

Digiday said that, while Netflix had struggled to meet its existing promises to advertisers, it was still seeking for ad deals for next year.

Separately, Netflix shares have also come under pressure after downbeat comments from one of the company's sternest critics on Wall Street.

Laura Martin, analyst at the investment bank Needham & Co, said that she eventually saw the business being overtaken by its competitors and eventually losing customers to them.

She told clients in a note to treat the shares "with caution" and added: "We see Netflix at a competitive disadvantage…because it doesn't own a bundle to lower churn in the US and it has largely saturated its offshore [total addressable market] already."

Today's decline in Netflix shares means that they have fallen by more than 51% so far this year - although they have rallied by some 60% since hitting their year's low in early May.
Newsletter

Related Articles

TechDigits
Close
0:00
0:00
Charlie Munger, calls for a ban on cryptocurrencies in the US, following China's lead
First generation unopened iPhone set to fetch more than $50,000 at auction.
Almost 30% of professionals say they've tried ChatGPT at work
Interpol seeks woman who ran elaborate exam cheating scam in Singapore
What is ChatGPT?
Tesla reported record profits and record revenues for 2022
Microsoft is finalising plans to become the latest technology giant to reduce its workforce during a global economic slowdown
Tesla slashes prices globally by as much as 20 percent
After Failing To Pay Office Rent, Twitter May Sell User Names
FTX fraud investigators are digging deeper into Sam Bankman-Fried's inner circle – and reportedly have ex-engineer Nishad Singh in their sights
TikTok CEO Plans to Meet European Union Regulators
U.S. Moves to Seize Robinhood Shares, Silvergate Accounts Tied to FTX
Coinbase to Pay $100 Million in Settlement With New York Regulator
FTX assets worth $3.5bn held by Bahamas securities regulator
Former FTX CEO Bankman-Fried finally arrested in Bahamas after U.S. files charges
Corruption works: House Financial Services Chair Waters doesn't plan to subpoena her donor, Sam Bankman-Fried, to testify at hearing on FTX collapse
Yellen hints at ‘national security’ probe into Twitter purchase
Elon Musk reinstates Donald Trump's Twitter account.
George W. Bush and Barack Obama will hold back-to-back disinformation conferences
Solar + Powerwall ensures you never lose power, even if the grid goes down
This man paid for strangers' grocery and it moved them to tears
Meta introduces a new version of Mark Zuckerberg
Virtual Reality on billboards: BMW advertisement on Times Square
Apple CEO Tim Cook says coding should be taught as early as elementary school: 'It's the most important language you can learn'
Apple Executive Resigns After Viral TikTok Shows Him Making Crude Jokes
Huawei is not only better technology, but also protecting users better: Apple Warns Of Security Flaw For Iphones, Ipads And Macs
Mark Zuckerberg warns many teams will ‘shrink’ as Meta revenue drops
Elon Musk reportedly begged for forgiveness after his affair with Google co-founder Sergey Brin's wife
J.P. Morgan’s wealth management guru has some advice for recent college graduates on managing money and building wealth
Pentagon widens scope of UFO-hunting unit
Bezos' girlfriend Lauren Sanchez gives $1M to group focused on migrant kids at US-Mexico border
Hong Kong gets its first metaverse churches with avatars and virtual preachers
The ‘Dirty Quid Pro Quo’ Between Democrats and Big Tech
Elon Musk swore in March not to sell any Bitcoin, but Tesla cashed out 75% of its Bitcoin holdings amid the crypto winter just months later
Crypto winter continues at Gemini as another round of layoffs hits Winklevoss crypto exchange
Ex-CIA engineer Joshua Schulte convicted over massive data leak
EU to build new top-secret bunker
Elon Musk fathered twins with one of his executives last year
Apple launches Lockdown Mode to block spyware attacks on at-risk users
Australia floods worsen as thousands more Sydney residents evacuate
Women's own body dissatisfaction appears to influence their judgment of other women's body sizes
Hacker claims to have obtained data on 1 billion Chinese citizens
British Army's Twitter and YouTube accounts restored after hack
Google will delete location history for visits to abortion clinics after overturning of Roe v. Wade
Elon Musk, Jeff Bezos, Other Top Billionaires Lose $1.4 Trillion In Worst Half Ever
Philippines orders critical news site to shut down
Social media companies could be sued for addicting children to their digital-drug in California 
Airport chaos: European travel runs into pandemic cutbacks
The teen who tracks Elon Musk's jet agreed to stop monitoring Mark Cuban's flights on Twitter after the billionaire offered business advice
YouTube Shorts Claims 1.5 Billion Global Users As TikTok Rivalry Heats Up
×