April 21, 2022
After years of resisting the idea of running advertisements on its streaming service, Netflix now is “open” to offering lower-priced tiers with ads, co-CEO Reed Hastings said on Tuesday, April 19, reports CNBC.
Hastings has long been opposed to adding commercials or other promotions to the platform, but said during the company’s prerecorded earnings conference call that it “makes a lot of sense” to offer customers a cheaper option.
“Those who have followed Netflix know that I have been against the complexity of advertising and a big fan of the simplicity of subscription,” Hastings said. “But as much as I am a fan of that, I am a bigger fan of consumer choice, and allowing consumers who would like to have a lower price and are advertising-tolerant to get what they want makes a lot of sense.”
The option likely wouldn’t be available on the service for a year or two, Hastings said. A new ad-supported tier has a lot of profit potential for Netflix, which on Tuesday reported its first subscriber loss in more than a decade.
Netflix cited growing competition from recent streaming launches by traditional entertainment companies, as well as rampant password sharing, inflation. and the ongoing Russian invasion of Ukraine for the recent stall in paid subscriptions.
In an effort to lure more subscribers, Netflix has increased its content spend, particularly on originals. To pay for it, the company hiked prices of its service. Netflix said those price changes are helping to bolster revenue but were partially responsible for a loss of 600,000 subscribers in the U.S. and Canada during the most recent quarter.
A lower-tier option that includes advertisements could keep some price-conscious consumers with the service and provide Netflix with a different avenue to garner funds.
“It’s pretty clear that it’s working for Hulu. Disney is doing it. HBO did it,” Hastings said. “I don’t think we have a lot of doubt that it works.”
Research contact: @CNBC