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In addition to plans to crack down on password sharing, Netflix is ramping up its efforts to bring advertising to the streaming platform to help draw in new subscribers.
Company executives have been hinting at introducing an ad-supported subscription tier for a few months now. However, the timeline for this only came into focus a few weeks ago when a leaked internal memo revealed executives were telling employees to prepare for the new service to arrive by the end of 2022.
Things ramped up this week when Netflix’s co-CEO, Ted Sarandos, spoke up about the company’s eagerness to embrace advertising.
According to The Hollywood Reporter, in speaking to a group of advertisers at the Cannes Lions festival, Sarandos emphasized that advertising is key to the streaming giant’s future, and the only way it’s going to bring in new subscribers.
“We’ve left a big customer segment off the table, which is people who say: ‘Hey, Netflix is too expensive for me, and I don’t mind advertising. We are adding an ad tier; we’re not adding ads to Netflix as you know it today. We’re adding an ad tier for folks who say, ‘Hey, I want a lower price, and I’ll watch ads.’Ted Sarandos, Netflix co-CEO
It’s been a surprising about-face for a company that once swore commercials would never grace its subscribers’ screens. However, those comments came at a time when Netflix was a dominant player in the market, with expansive content licenses that allowed it to show everything from Marvel and Star Wars movies to prime-time comedies and dramas.
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Since then, Netflix has had to face a whole new reality. As rights-holders have realized that it’s more profitable for them to strike out on their own, Netflix has lost most of its premium third-party content to a much larger and more competitive playing field.
At one time, Netflix was the streaming service to get, but as Disney, Paramount, NBCUniversal, HBO, and others have created and expanded their streaming services, customers have many more choices — perhaps too many — and Netflix has found itself slowly becoming an also-ran as it’s forced to lean more heavily on its original programming.
If You Can’t Beat ‘Em…
To make matters even more complicated, most of these rivals either already offer ad-supported tiers or they’re making plans to do so.
Netflix really has no choice but to follow suit.
It’s also telling that this is the first time Netflix has made an appearance at the Cannes Lions global advertising conference. Of course, it had little reason to show up before, but Sarandos’ presence this year makes it clear that the streaming giant plans to embrace the ad industry in a big way.
Sarandos also confirmed that Netflix is already in talks with potential ad-sales partners, and he’s slated to be honored with the Cannes Lions entertainment person of the year award.
What This Means for You
The good news for loyal Netflix subscribers is that the Netflix co-CEO made it clear that ads will not be coming to the existing paid tiers. If you’re already paying for Netflix, you won’t see ads, even if you’re only on the basic $9.99/month plan.
As Sarandos noted, this is for folks who think that $9.99 is still too expensive but are willing to consider getting on board at a lower price, even if they have to watch ads.
Netflix is already unique among streaming companies for its tiered plans: $9.99/month for 480p streaming to one device, $15.49/month for 1080p on up to two devices, and $19.99/month for 4K HDR streaming for up to four devices.
From Sarandos’ comments, it sounds like the company only plans to offer a single ad-supported tier that will almost certainly be priced below the $9.99/month 480p basic subscription and will therefore likely have the same limitations — but with ads.
By contrast, Disney+ costs $7.99/month or $79.99/year for full 4K HDR streaming on up to four screens — and it’s also considering an ad-supported tier. So, if you’re beginning to think that Netflix has priced itself out of the market, you’re probably right.