Yesterday, Netflix reported its Q4 2022 earnings result, topping 230 million worldwide subscribers, an increase to 223.09 from 7.7 mil subs added during the report. During the call when the company's co-CEO spoke, Ted Sarandos said the company is keeping an eye on a free ad-supported TV option as they do more to become something like more consumers switch to ad-supported FAST services.

"That definitely is open to all the models that are out there for us now, but I believe we've got a ton on our plate this year, whether it's paying sharing or our launch in advertising and continuing to our slate of content that we try to drive to our members. So, we'll keep an eye on this segment, for sure." Sarandos said.

While a Netflix FAST channel offering probably won't happen anytime soon, Sarandos isn't dismissing the possibility that there'll be one in the future. When and if Netflix goes through with a FAST option, the move will most likely boost its ad business significantly. According to nScreenMedia, the FAST industry will reach 216 million monthly active users in 2023, driving $4.1 billion in ad revenue.

Netflix is notorious for being slow to respond to the industry's trends. It took former co-CEO Reed Hastings, who just announced he would step down, many years even to think about launching a cheaper ad-supported plan. Hulu is the third-oldest streaming service next to Netflix and Amazon Prime Video (formerly Amazon Unbox) and has offered an ad tier for over a decade.

It is relying on its ad business to be a major source of revenue, having estimated $8.17 billion overall for Q1 2023.

Netflix founder Reed Hastings steps down as co-CEO

But in a Kantar report out recently, it's looking like that "Basic with Ads" plan isn't paying off for Netflix as much as they'd expected. While Netflix President of Worldwide Advertising Jeremi Gorman told an interviewer at Variety's Entertainment Summit at CES the company is pleased with how its ads business is growing, Kantar data reports that "Basic with Ads" now represents 12% of its subscriber base. It was intended to attract a new subscriber, but looks like only a few customers traded down to the $3 plan.

It was yesterday that Netflix admitted to its letter to shareholders the successful launch of its ad-supported tier but said that "there's much more still to do."

The addition of all its content should attract more subscribers to this cheaper tier. So far, 85% to 95% of the contents of Netflix are available. The company is now in the process of renegotiating deals with studios.

In addition, the ad tier is not everywhere. "Basic with Ads" is only available in the U.S., the U.K., France, Germany, Spain, Italy, Australia, Japan, Korea, Brazil, Canada and Mexico. The company has no immediate plans to expand, but it has future plans to target bigger ad markets.

"We wouldn't get into a business like this if we didn't believe it could be bigger than at least 10% of our revenue and hopefully much more over time in that mix as we grow," Netflix CFO Spencer Neumann said on yesterday's earnings call.

Despite this, Netflix claims its ad tier is doing just fine

Overall, the company said "2022 was a tough year," according to Netflix's letter to shareholders. The streaming leader saw two painful quarters of the year with over one million global subscribers lost.

For Q4, revenue added up to $7.85 billion. Recently, the company has experienced slow growth in revenue. This year, the company raised $7.93 billion for Q3 2022 and $7.97 billion for Q2.

That can take the form of continued enhancement at every level of the Netflix service, with paid sharing available in addition to the ad offering, the company determined in a letter on Wednesday night.

Next year, Netflix will reportedly kick 2023 off by issuing its own password-sharing policy and launching the feature whereby customers can live-stream programmes.