Netflix (NFLX) is taking steps to enter the advertising business...
On Thursday, co-CEO Ted Sarandos said the streaming giant is holding multiple discussions with potential partners to integrate advertisements into its platform. He noted that Netflix is exploring the possibility of building its own ad business as well.
According to the Wall Street Journal, Alphabet (GOOGL), Comcast (CMCSA), and NBCUniversal are among the top contenders for a potential ad agreement. Meanwhile, reports have emerged suggesting Roku (ROKU) may also be in the running.
Still, it remains unclear whether Netflix will work with one or multiple partners, as Sarandos noted the streaming giant is "talking to all of them right now" to make the transition as easy as possible – and capable of being expanded upon.
Prior to today's news, Netflix reported a subscriber loss of 200,000 in its first quarter compared with the expected gain of 2.5 million. And while it still has 221.6 million subscribers, the fall in users has since put substantial pressure on its share value.
This prompted the company to release a shareholder letter indicating that even with its continued popularity, the rapid rise of competitors such as Disney (DIS) has begun to eat into its sales and growth prospects – pushing it to explore other ways to retain subscribers and generate consistent revenue.
So, these developments further support the notion that Netflix may be shifting away from its position as a growth stock toward one that offers stable revenue at a reasonable valuation.
And any actions the company takes moving forward will likely focus on appealing to a different investor class that is less concerned with price-to-earnings metrics and more on long-term growth – with a lower-cost subscription option ultimately being one way to achieve this goal.