Netflix estimates ad-supported tier will reach 40 million viewers by late 2023

Netflix Inc. estimated that an advertising-supported version of its streaming service would reach about 40 million viewers globally by the third quarter of 2023, according to a document reviewed by The Wall Street Journal that Netflix shared with ad buyers.

Executives from Netflix and its advertising partner, Microsoft Corp., have met with ad buyers in recent weeks, seeking to lock in deals ahead of a planned launch later this year.

In preliminary projections, Netflix told ad executives it expects to have 4.4 million unique viewers worldwide at the end of the year, with 1.1 million coming from the U.S. The company estimated that would grow to over 40 million unique viewers by the third quarter of 2023, with 13.3 million from the U.S.

Netflix’s projections for advertisers covered a dozen launch markets, including Brazil, Mexico, Japan, the U.K., France, Germany, Korea, Spain, Italy, Australia and Canada.

The metric the company has shared, “projected unique viewers,” is expected to be higher than the number of subscribers for the advertising-supported Netflix plan, since more than one person in a subscribing household will likely be able to watch the service.

“We are still in the early days of deciding how to launch a lower priced, ad supported tier and no decisions have been made,” a Netflix spokeswoman said in a statement.

The streaming company continues to evaluate the potential demand for the ad-supported plan, and its forecasts for subscriptions and viewers could change over time, according to people familiar with the matter.

Netflix, with 220 million subscribers, is betting that a lower-cost, ad-supported plan could bring in new users and boost revenue, as the company confronts stepped-up competition and a maturing U.S. market.

The streaming giant lost nearly one million subscribers in the June quarter. It is joining rivals such as HBO Max and Disney+ that have or are planning to launch ad-supported services.

Netflix’s foray into advertising is a major reversal for a company that long said it would remain ad-free.

Netflix said in a July letter to shareholders that the new ad-supported option would likely begin in early 2023, but it has told some ad buyers that it would launch on Nov. 1. The company is seeking to charge brands premium prices to advertise on its service, The Wall Street Journal previously reported.

The viewership projections were distributed to some ad-buying firms, so that they can advise their advertising clients on the projected reach of the new service—a factor in determining how much to spend.

The initial forecast for unique viewers—around 40 million in about a year or so—is small compared with Netflix’s huge customer base, but would put the company on the map as a significant destination for online-video ads. The pace of growth for Netflix’s service will depend, partly, on its price.

Advertiser demand to be part of the launch is expected to be robust, some ad buyers said. Netflix has been off-limits to advertisers for years and has the streaming industry’s largest audience.

Some ad buyers said they were unhappy with certain aspects of Netflix’s planned service, including that there is expected to be only limited ability to choose where ads run.

Netflix also doesn’t initially plan to have an independent firm provide measurement, or verification that advertisers are getting the exposure they paid for. The Wall Street Journal