With rumors circling for months about changes to the revenue structure and plan pricing of Netflix, the streamer has finally provided specific details about its plans to introduce an ad-supported tier to the platform.
In an interview at Cannes Lions advertising festival on June 23rd, co-CEO Ted Sarandos clarified the streamer’s plans, and streamers who enjoy their current plan at their current price can breathe a sigh of relief. As per Sarandos’s statements, Netflix will not be adding ads to all plans or making subscribers pay more to avoid them. Instead, the streamer will be adding a new with-ads tier that comes in at a lower price point.
According to Sarandos in The Hollywood Reporter, “We’ve left a big customer segment off the table, which is people who say, ‘Hey, Netflix is too expensive for me and I don’t mind advertising. We are adding an ad tier.”
Sarandos went on to clarify, “But we’re not adding ads to Netflix as you know it today. We’re adding an ad tier for folks who say, ‘Hey, I want a lower price and I’ll watch ads.’”
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The news about adding ads to Netflix comes on the heels of a loss of 200,000 subscribers in the first quarter of 2022. After the subscriber drop was announced, co-CEO Reed Hastings did say that Netflix would be taking a look at ad-supported plans, but indicated it would be a slow role “over the next year or two.”
But given Sarandos’s statements, it looks like the timeline got moved up. But when exactly will the new tier be available? In May, The New York Times reported that Netflix sent out an employee memo saying the ad-supported tier could be introduced by the end of 2022.
On the plus side for everyone whether they hate ads or “don’t mind them,” Sarandos stated that Netflix wants to give its users an ad experience that is “more integrated and less interruptive” than traditional TV commercials.
Friendly competition
Netflix has dominated the streaming market since it began making the transition from little red envelopes in the mail to streaming original content like House of Cards right into subscribers’s homes. But nothing can last forever, and as other big names have themselves transitioned into the streaming business (NBC, Amazon, HBO), it was only inevitable that newcomers would poach some amount of Netflix’s subscribers and dollars.
In other words, the subscriber loss in and of itself doesn’t spell doom for the big red streaming machine. In fact, Netflix still dominates in the quantity and quality of original programming, often offering more new content each week than all its competition combined. As long as Netflix is consistent in both quality and quantity, it’s unlikely that the bulk of its subscriber base will disappear any time soon.
With that in mind, it seems like the cheaper tier with ads might be just the right troubleshoot to lure some customers back who left because they found they were overcommitted to the various streaming services, spending too much monthly on subscriptions. At a lower price point, the commitment to Netflix will feel less burdensome and easier to fit into the monthly budget.
Related: Netflix Begins To Roll Out Its New Extra Home Fee