Netflix CFO does not see ad-tier as ‘material to revenue’ so far

Netflix Inc (NASDAQ: NFLX) is in focus today after Spencer Neumann – its Chief Financial Officer warned of softer margins at a Bank of America conference.

Netflix warns of softer margins

The finance chief sees operating margins keeping within 18% to 20% versus their peak at 21%.

He agreed that the recently launched ad-supported tier and ongoing crackdown on password sharing will eventually help improve margins but said both those initiatives will likely take time to turn instrumental.

What we have done so far is not material to the overall revenue of the business. It’s something we’re building into and we have to get better across the board.

Netflix came in shy of revenue estimates in its latest reported quarter (read more) that has resulted in an over 15% decline in its stock price in less than two months.

Netflix is committed to scaling its ad business

CFO Neumann also tagged scaling the advertising business a top priority for Netflix Inc at the Bank of America conference and said he was bullish on ad-tier over the long term.

The executive refrained from divulging exactly how many new subscribers has that tier attracted so far but indicated the number was healthy. Interestingly, though, users picking individual accounts in response to password sharing crackdown were primarily choosing premium tiers, he added.

The ad tier is a healthy mix in general across our plans, but it’s the minority because we have multiple plans. It skews a little bit more towards ad-free in these spin-offs.

Neumann flagged the ongoing Hollywood strikes as bad for business as well.