Netflix engages in marketing frenzy ahead of ‘The Gray Man’ debut

Yahoo Finance entertainment reporter Allie Canal explains how Netflix is ​​investing heavily in its new movie ‘The Gray Man’.

Video transcript

Faced with a shrinking subscriber base, instead of shrinking, Netflix is ​​getting big — in fact, huge — betting $200 million on a star-studded spy flick, starring Chris Evans and Ryan Gosling as well as a renowned director. Allie Canal here with this story and an overview of Netflix earnings. Allie, good to see you. Tell us about “The Gray Man” and what are the stakes for Netflix on this one?

ALLIED CHANNEL: Well, as you said, Dave, Netflix is ​​betting really big on this movie, for good reason. You mentioned some of those A-list actors — Ryan Gosling, Chris Evans, Ana de Armas. But the marketing around this movie has been huge – TV commercials, billboards in major cities, and it’s an interesting strategy for Netflix. Normally, the platform relies on word of mouth. They don’t market a lot of specific titles. So it’s an experience in many ways. And I think that shows Netflix reassessing who they are as a streaming platform.

Do they just want to pump title after title? Do they want more quality than quantity? Where should they spend money and where should they cut back? And that comes back to the real issue here, which is this downturn in subscribers that we’ve seen across the industry, increased competition. The stock is down 70% year-to-date, and investors are really wondering about Netflix’s long-term prospects. And with second quarter earnings fast approaching, all eyes are on that subscriber growth and whether or not the company will be able to generate that revenue and free cash flow in the future.

SEANA SMITH: Well yes, Allie, that’s the big question. You mentioned the fact that stocks are down about 70% since the start of the year. They already expect to lose 2 million subscribers in the last quarter. At least that was what they expected. UBS lowers its price target on the stock today ahead of the results. What do you think we should expect next week?

ALLIED CHANNEL: Well, analysts and investors are really preparing for an impact. UBS has a neutral rating on the stock. The bank says it expects subscribers to follow this loss of 2 million users. Price increases are largely to blame, along with data pointing to a decline in app downloads. But another thing to watch here will be FX pressures. UBS and Bank of America have specifically denounced it, saying the currency is a big weak spot for the company, as the dollar remains incredibly strong against other types of currencies. This could pose a downside risk to the outlook amid already slowing revenue growth.

That being said, we have the ad-supported offer to help offset some of those losses. Netflix is ​​partnering with Netflix to roll it out. But a big question is, when can we actually expect this? Netflix originally estimated that an ad tier would hit the market at the end of this year, but analysts are a little cautious about that timeline. Needham’s Laura Martin said in our program yesterday that she doesn’t expect this until Q3 2023 due to Microsoft’s lack of experience in the third-party ad tech space.

And I don’t think that potential delay is factored into the stock right now. Investors want ad revenue to hit Netflix fast and furiously, especially as recession fears loom. So it’s really a demo story for Netflix at this point, but the general consensus is that investors will be disappointed next week.

Yeah. Many thought you just flipped the switch and have ad-supported content, but they don’t have the infrastructure for that. For your point, it’s going to take a while. I look forward to hearing from you next week on these gains. Allie Canal, have a nice weekend. Thanks.

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