Netflix, the world’s largest on-demand video streaming service, may introduce a lower-priced tier with ads soon.
As reported by The New York Times on Tuesday (May 10), Netflix told employees that they were looking to bring an ad-supported tier to the platform by the end of the year.
After years of denying the possibility of advertising on the streaming platform, the company had a change of heart in its last earnings call according to the NYT report.
The move comes after the streaming giant reported a loss of 200,000 subscribers in the first quarter of 2022.
According to Co-Chief Executive Officer Reed Hastings, one way to increase the price spread is to offer low-end plans with advertising along with their broader plans to charge for sharing accounts.
“Those who 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,” said Hastings in an earnings call in April.
“Allowing consumers who would like to have lower price and are advertising tolerant get what they want makes a lot of sense,” he added.
However, customers who don’t wish to see ads will continue to be offered ad-free plans.
The move to adopt an ad-supported streaming model follows Netflix’s aggressive experimentation with pricing in many growing markets around the world, including India, Indonesia and Kenya in recent years to expand the reach of its service.
Earlier this month, Netflix reported its first subscriber loss in more than a decade and said it expects to lose 2 million more global subscribers in the current quarter.
The streaming giant cited a number of factors for the decline in its subscriber base, including the saturation in its major markets and growing competition from streaming rivals such as Disney, Paramount and Warner Bros. The company also noted that more than 100 million users watch Netflix by borrowing passwords and accounts from other households.
“Our relatively high household penetration—when including the large number of households sharing accounts—combined with competition, is creating revenue growth headwinds,” Netflix said in an earlier statement.