With its last quarterly earnings report, Netflix announced that it was working on an ad-supported tier of its service. This is was kind of surprising, as Netflix had been adamant about not having ads, only to bring in an ad-supported tier.
Now, according to the New York Times, Netflix has told employees that it will have ads available by the end of 2022. That’s much sooner than expected.
In the note to employees, Netflix executives said that they were aiming to introduce the ad tier in the final three months of the year. That is according to two people who shared details of the communication. The note also explained that Netflix is looking to begin cracking down on password sharing among its subscriber base around the same time.
Why is Netflix doing ads?
There’s two main reasons for Netflix to add ads to its platform. One is more revenue, and two is adding a cheaper plan to continue growing its subscriber-base. In the first quarter of 2022, Netflix lost 200,000 subscribers. That’s the first time it has lost subscribers in over a decade.
Netflix is also expecting to lose another two million in the coming months. Because of this, Netflix’s share price has also dropped quite substantially. Wiping out about $70 billion from its market cap.
By including ads, Netflix can offer its service at a lower price, while still bringing in revenue by using ads to offset those costs. Netflix is really the only streaming service that doesn’t have ads right now – Showtime and Starz is the only others. It’s unclear how low the price would be for ad-supported Netflix, but considering the standard plan is $15.49, it likely would be around $10. That would make it similar to HBO MAX. Which offers its ad-supported tier at $9.99 and ad-free tier at $14.99.
Subscribers are going to be upset about Netflix adding ads, no matter the case. Whether that means Netflix is cheaper or not. But it will also depend on how well those ads are placed. Are they going to be every few minutes like Hulu? Or only at the beginning and end like HBO MAX? We’ll have to wait and see.