After years of declining calls for an ad-supported tier of streaming, Netflix co-founder and co-CEO Reed Hastings said Tuesday that the company is “very open to offering even lower prices with advertising as the consumer choice.”
Apparently, the company is now exploring the option and “trying to figure it out in the next year or two.” Hastings admits that introducing an ad-supported tier would mean a major rethink for the company, saying he’s always been “anti-complexity of advertising and a big fan of the simplicity of subscriptions.”
Hastings now pitches the idea of an ad-supported tier as something that “makes a lot of sense” for “consumers who want a lower price and are ad-tolerant.”
Following Tuesday’s news that it was losing subscribers for the first time in a decade, Netflix appears open to many things it had declined to do — co-CEO Ted Sarandos even laid out what a long-rumored move in the Live sports might be necessary. Quoted by Deadline, he said, “I’m not saying we’re never going to play sports, but we need to find a way to make it a big revenue stream and a big profit stream,” which marks a significant change from the flat that hasn’t previously Offered on Netflix.
Netflix would be far from the only company to introduce an ad-supported tier. Competitors like Hulu, Peacock, and even HBO Max are offering plans that require consumers to pay less (or, in Peacock’s case, nothing) if their shows are occasionally interrupted. Disney also announced plans to add an ad-supported option to Disney Plus by the end of the year.
Netflix currently charges $10 per month for the Basic tier, $15.49 per month for the Standard tier, and $20 per month for the Premium tier. These prices are relatively new — the company raised them in March. During the call, Hastings says he’s proud of Netflix’s “price range,” but as we detailed in January, the company’s deep market penetration means it has limited ability to make more money without price increases over and over again raise. Introducing a cheaper, ad-supported tier (as well as trying to reduce password sharing) could be part of the company’s plan to increase its customer base and introduce another revenue stream.
Update 7:18pm ET: Added note that Ted Sarandos links to live sports.