Netflix explores low-cost, ad-supported plans after years of resistance

In this photo illustration the Netflix in App Store logo seen displayed on a smartphone screen.

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After years of resisting ads on its streaming service, Netflix is ​​now “open” to offering low-cost tiers with ads, co-CEO Reed Hastings said Tuesday.

Hastings has long been opposed to adding ads or other promotions to the platform, but said on the company’s pre-recorded earnings conference call that it “made a lot of sense” to offer customers a cheaper option.

“Those who have followed Netflix will know that I have been against the complexity of advertising and a huge fan of subscription simplicity,” Hastings said. “But as much as I’m a fan of that, I’m a bigger fan of consumer choice, and allowing consumers who would like a lower price and who are ad-tolerant to get what they want makes a lot of sense. .”

The option probably wouldn’t be available on the service for another year or two, Hastings said. A new level ad-supported has a lot of profit potential for Netflix, which announced its first loss of subscribers in more than a decade on Tuesday.

Netflix cited growing competition from recent streaming launches by traditional entertainment companies, as well as rampant password sharing, inflation and the ongoing Russian invasion of Ukraine for the recent drop in paid subscriptions.

In an effort to attract more subscribers, Netflix has increased its spending on content, especially on Originals. To pay for it, the company raised the prices of its service. Netflix said these price changes helped boost revenue but were partly responsible for losing 600,000 subscribers in the United States and Canada in the last quarter.

A lower-tier option that includes ads could keep some consumers price-conscious with the service and provide Netflix with a different way to raise funds.

“It’s pretty clear that it works for Hulu. Disney does it. HBO has it,” Hastings said. “I don’t think we have much doubt that it works.”

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