Streaming TV viewers may start to see something they never expected on Netflix: commercials. But, it looks like desperate economic times have called for desperate measures the company has resisted for years.
The shift in attitude toward ads on Netflix comes as the company released subscriber numbers in its April 19 shareholder letter, which highlighted a net loss of 2 million subscribers during the first quarter. For reference, Netflix hasn’t had a net subscriber loss in more than 10 years, according to CNBC.
After years of resisting the idea of showing advertisements on its streaming platform, Netflix addressed the idea directly during its 2022 Q1 earnings call. During the video call, Netflix Co-CEO Reed Hastings said the company is “open” to the concept of offering lower-priced tiers including ads for customers in the next year or two.
“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.”
Streaming services with advertising isn’t a new concept. Hulu has offered an ad-supported subscription tier for a while and Amazon’s Freevee (formerly IMDb TV) is a similar option. In the summer of 2021, HBO Max launched an ad-included subscription tier for $9.99 per month. In March 2022, Disney+ announced it would start offering an ad-supported subscription tier in late 2022.
This means that Netflix was essentially the last holdout among the major streaming services. After seeing the kind of money competitors have been making with that plan, the company appears to be giving in.
Hastings told investors the financial numbers don’t lie when it comes to the success other streamers have had with ad-based subscriptions.
(AP Photo/Jenny Kane, File)
“It’s pretty clear that it’s working for Hulu. Disney’s doing it. HBO did it,” Hastings said. “I don’t think we have a lot of doubt that it works. All those companies have figured it out. I’m sure we’ll just get in and figure it out as opposed to just test it and maybe do it or not do it.”
When can customers expect to see ads pop up in the middle of “Bridgerton” or other favorite series? Not any time in the near future, it seems. Netflix gave no specifics on a timeline for the introduction of the new ad-inclusive subscription plan.