Netflix revealed plans for cheaper, ad-supported subscriptions for the streaming service.
As reported by The Hollywood Reporter, it was revealed by Netflix's co-CEO Reed Hastings during a quarterly earnings call that the company would consider plans for ad-supported plans "over the next year or two," and COO Greg Peters called the prospect of advertising "an exciting opportunity" for Netflix.
"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 get what they want, makes a lot of sense. Think of us as quite open to offering even lower prices with advertising as a consumer choice."
Hastings stated that Netflix's move toward advertising was inspired by competing streaming services. "It is pretty clear that it is working for Hulu, Disney is doing it, HBO did it. We don't have any doubt that it works,” Hastings continued, adding that Netflix will do something similar to Hulu's plan layer. However, Netflix's ad-backed tier would not include data tracking and ad-matching like other streaming services.
"In terms of the profit potential, definitely the online ad market has advanced, and now you don't have to incorporate all the information about people that you used to," Hastings said. "We can stay out of that, and really be focused on our members, creating that great experience."
Netflix also reported that it had lost 200 thousand subscribers despite the company's predictions that it would gain 2.5 million, citing reasons for the decrease such as password sharing and rival streaming services, among others. Overall, the company expects to lose two million more subscribers over the course of the current quarter, which lasts from April to June.
In March 2022, CFO Spencer Neumann stated that ad-supported tiers were not "in [Netflix's] plans right now," though he did echo Hastings's comments about consumer choice. "Never say never," Neumann said. "It's not like we have religion against advertising, to be clear. We lean into consumer experience, consumer choice, and what's great for our creators and storytellers. [Advertising is] not something that's in our plans right now. We have a great model in the subscription business. It scales globally."
Source: The Hollywood Reporter