MOVIE NEWS – Netflix executives predict that the new tier will bring in more than $3 billion in revenue annually.

After just a few months of availability, Netflix seems pleased with the early returns from the streaming service’s new ad-based tier. Company executives believe the low-cost subscription option – $7 a month in the U.S. – could bring in more than $3 billion a year in the future.

According to Deadline, Netflix co-CEO Greg Peters spoke about the success of the ad-based tier during the company’s fourth-quarter earnings call.

He said the growth of the new low-cost option is “solid”. It’s bringing in new subscribers rather than switching current members. In addition, their engagement is consistent with what has been seen with higher-premium customers.

“We’re just getting started,” Peters said. “We’re constantly improving, and we see the trajectory ahead of us.”

Looking ahead, Netflix CFO Spence Neumann knows that Hulu is the main competitor in the ad-based TV streaming space. Especially since it launched significantly earlier. However, Neumann believes the service will catch up.

“We’re not going to be larger than Hulu in Year 1, but we would expect to be as large or larger over time, certainly, in just our U.S. market, and more from there.”

Netflix added more than 7 million subscribers in the fourth quarter. This is the first quarter where advertising-based levels were achieved. The ad-supported service launched in November. Ads are roughly the equivalent of four minutes every hour.

That’s not the only thing happening at the company. Founder and co-CEO Reed Hastings is taking on a new role as executive chairman. And the streaming service plans to cut back on password sharing.

Source: Deadline