Netflix May Launch Ad-Supported Streaming Tiers For Lower Monthly Fees
Either someone at Netflix broke a mirror, stepped under a ladder, or offended an ancient witch sometime this week because the news today has just been one huge corporate shift after another. After years of lovingly participating with jokes about how plenty of people share Netflix passwords with their friends and family, they recently announced that they're finally cracking down on unauthorized use of their streaming service. Now, following a long history of claiming to be focused on subscription-only-based plans, Netflix is allegedly considering the potential of lower-cost, ad-supported subscription opportunities. As was stated by co-CEO Reed Hastings during the Netflix Q1 earnings interview, the streaming goliath is anticipating finalizing its ad-supported streaming strategy sometime within the next two years. "Think of us as quite open to us offering even lower prices with advertising as a consumer choice," said Hastings.
Likely in the works for a while, it's hard not to see this move as a response to the stagnated subscription growth in the wake of competing services like Disney+, as well as the reported loss of 200,000 subscribers in Q1, with an anticipated loss of 2 million subscribers in Q2 following Netflix's suspension of service in Russia after the country's invasion of Ukraine. If the company is able to successfully monetize the hundreds of millions of estimated users utilizing their services for free by sharing passwords, they have the potential of bringing in fat stacks of cash. However, if they are unable to achieve this goal, Netflix might need to rethink their entire business model.
It's starting to feel like the return of cable
"Those that have followed Netflix know that I've been against the complexity of advertising and a big fan of the simplicity of subscription, but as much as I'm a fan of that, I'm a bigger fan of consumer choice," Hastings said. "Allowing consumers who would like to have a lower price and are advertising-tolerant [to] get what they want, makes a lot of sense."
While Hastings didn't offer any insight as to how much Netflix might charge for an ad-supported tier, their Basic plan currently goes for $9.99 a month, their Standard plan is $15.49, and their Premium option is $19.99. "It's not like we have a religion against advertising, to be clear," Netflix CFO Spencer Neumann said at a Morgan Stanley investment conference. He clarified that the tier was "not something that's in our plans right now," but continued with, "never say never." This statement was made just one month ago.
This is the first time in Netflix history that the company has reported a loss of subscribers, and lost a whopping $50 billion in value after it was publicly reported that it had fallen short of its subscriber goals. During the Q1 call, Hastings even acknowledged that their competitor, Hulu, has shown success with their ad-supported programming, and was interested in seeing how the ad-supported tier at HBO Max would play out over time. "We don't have a lot of doubt that it works," he said.
For those who are happily enjoying their ad-free programming, never fear, as this option will always be available. Ad-support may become an option, but will hopefully never replace the standard or else it's cable all over again.