A different kind of Netflix ad: a billboard for ’Beverly Hills Cop: Axel F' (Beata Zawrzel/NurPhoto via Getty Images)

Adding Down?

Netflix's ads tier is growing but it's not the savior the company hoped for — yet

Last year they were telling a different story about ads profitability.

7/19/24 10:24AM

A year ago, Netflix said it was making more money from ads subscriptions than the more expensive ad-free options. During 2023’s Q2 earnings call, Chief Financial Officer Spence Neumann said, “Our overall ads ARM continues to be higher than basic ad free globally,” referring to average revenue per membership, which is a combination of the subscription fee and ads revenue.

That seems to have changed. “Currently our ads ARM is lower than our non-ads ARM,” Co-CEO Greg Peters said on the earnings call yesterday.

What happened?

“Currently because we've been scaling so rapidly, we're racing behind essentially to fulfill all of that increasing inventory. And we're lagging in that regard,” Peters said.

In other words, it seems people are signing up for the ads tier so quickly, Netflix has more room to show ads than it has deals with advertisers or the ad tech is not good enough to meet this increased demand, meaning they are not able to effectively monetize all these new views with ads.

“We're on track to achieve our critical scale goals for all of our ads countries in 2025,” he said.

“We're adding more sales folks. We're adding more ads operation folks, building our capabilities to meet advertisers. A big component of that is giving advertisers more effective ways to buy Netflix.”

Netflix already appears to be shaking up its ad team. Yesterday, media industry vet Peter Naylor became the second of two senior executives to leave the ad team.

Netflix introduced its lower cost ads tier in limited markets a year and half ago. In May the company said its ad-supported tier had 40 million global subscribers, or almost double what it was in January. That meant ads subscribers represented about 15% of all subscriptions.

Netflix reported that this quarter its ads tier grew 34% from last quarter, but didn’t say how many subscribers that was. It did say a full 45% of new signups in ads markets was for the ad tier last quarter, growing from 40% in Q1.

For now, Neumann called ads a “meaningful contributor” to the streaming company’s revenue.

“When you get into 2026 and beyond, it can be even more meaningful, and hopefully it becomes the point where it is a primary contributor given all that engagement and reach that we're building,” he said.

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Prediction markets have, predictably, been given a boost by the summer of sports

Major platforms like Kalshi and Polymarket have seen huge upticks in users of late, thanks in no small part to what’s felt like a recent sporting smorgasbord, with major competitions across hockey, basketball, and soccer soaking up fans’ time (and spending, clearly) at the outset of summer.

While gaming industry groups may not like it, there’s been a huge change in the methods people are using to put money on the big games, with everyone from fortunate NYC bar owners, to a far less fortunate Spanish supporter, turning to prediction markets to try and turn their sports know-how into cold, hard cash.

According to a new report from Adam Blacker for apptopia, that shift might have been even more seismic than imagined in the wake of the NBA and NHL finals and around the 2026 World Cup kicking off.

2026 World Cup Reverses Seasonal Lull for Sports Betting Apps

According to a new report from Adam Blacker for apptopia, that shift might have been even more seismic than imagined in the wake of the NBA and NHL finals and around the 2026 World Cup kicking off.

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Gold Tesla Cybercabs are piling up, but they’re not picking up passengers yet

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TAKING ACCOUNTS

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Britain announces social media ban for under-16s starting early 2027

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Anthropic pulls Fable and Mythos access worldwide after Trump administration bars their use by foreign nationals

Only days after releasing two versions of its next-gen AI model, Anthropic has disabled them for users worldwide.

Anthropic says it received a Friday night order from the Trump administration to suspend access to the models for any foreign national (anywhere in the world) — a group that included some Anthropic employees. In response, the company turned off access to everyone.

Last week, the company released to the public its much-anticipated Claude Fable 5 model (and its restricted version Claude Mythos 5, which is still being tested with trusted partners). Anthropic said in a blog post announcing the action that officials cited national security concerns with the new models, while offering few specific details.

The post said that the government gave the company “verbal evidence of a potential narrow, non-universal jailbreak” of the public Fable 5 model. A jailbreak is a means by which users can evade restrictions built into the code to unlock prohibited functionality. Anthropic downplayed the significance of the attack, and said other major models, such as OpenAI’s GPT-5.5, could also be affected by the technique described.

Fears of these first Mythos-class models being misused are running high, after Anthropic warned the cybersecurity world in May that the advanced cyber capabilities of Mythos have rapidly discovered thousands of vulnerabilities in ubiquitous software, leading to the decision to restrict the full version of the model to a close group of trusted partners for testing.

This morning, Axios reported that Anthropic technical staff have flown to Washington to meet with White House officials to resolve the issue.

The Wall Street Journal is reporting that the Trump administration’s decision to take action against Anthropic was prompted by discussions that Amazon CEO Andy Jassy had with officials, including Treasury Secretary Scott Bessent. According to the report, Amazon researchers said they had been able to evade some of Fable 5’s security restrictions using specific prompts. Amazon is a major investor in Anthropic.

Anthropic is currently suing the US government to fight the Pentagon’s blacklisting of the company on national security grounds.

Statement on the US government directive to suspend access to Fable 5 and Mythos 5