Netflix (NFLX) Might Plan to Make Kids Shows, Movies Ad-Free

Netflix NFLX is reportedly planning to remove ads during kids’ movies and TV series, keeping kids programming commercial-free when the company introduces its advertising-supported service, per a Bloomberg report.

In addition, some studios might not allow Netflix to run ads during certain shows or movies licensed to the company, but Netflix could get around this by playing ads before or after the program.

Besides, Netflix may not run ads during original movies when they’re first released and will instead insert ads at a later date. This decision may help alleviate some of the concerns filmmakers might have about ads detracting from their work.

Shares of the company are down 60% year to date compared with the Zacks Consumer Discretionary sector’s decline of 28.8% over the same time frame.

Netflix, Inc. Price and Consensus

Netflix, Inc. price-consensus-chart | Netflix, Inc. Quote

Fierce Competition from Disney+ Creates Challenge

Netflix is following the footsteps of its rival Disney DIS owned Disney+. In May, Disney+ announced that preschool children who use their profile to watch the ad-supported Disney+ tier will not see any advertising.

Overall, Disney+ subscriptions went up to 152.1 million for its third fiscal quarter that ended on Jul 2, and the streaming giant added 14.4 million new subscribers in the April-June period. In total, Disney streaming services, comprising Disney+, Hotstar, Hulu and ESPN+, now have over 221.1 million subscribers worldwide. The recent gains propelled the company past rival Netflix, which at the end of the second quarter had 220.7 million subscribers.

Organizations like the American Psychological Association have called for strict restrictions on advertising for children. Alphabet’s GOOGL Google-owned YouTube now officially limits the amount of data it and creators can collect on content intended for children.

The company was fined $170 million by the US Federal Trade Commission (FTC) in 2019, as part of a settlement to end probes into YouTube`s alleged collection of children`s personal information without the consent of their parents.

Netflix, in June, confirmed that it is set to launch an ad-supported tier to reduce its losses and bring more users to the platform. The new tier will cost less than the current ad-free service and is part of a plan to make Netflix more attractive to cost-conscious consumers.

Netflix’s most popular streaming plan in the United States is now $15.50 per month. That follows several rate hikes to help pay for its original programming, which has gained importance since Disney pulled its programming and classic movies from Netflix after licensing agreements between the companies expired.

This Zacks Rank #3 (Hold) company is renegotiating deals to put ads on its platform and will launch first in countries that have more mature advertising markets. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hit by a dwindling user base, Netflix has partnered with Microsoft MSFT to provide the infrastructure that powers the streamer’s ad-supported tier that the company plans to launch in early 2023. The software giant brought in $10 billion in ad revenues last year, selling ads on various services such as its Bing search engine and its business-focused social network, LinkedIn.

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