Netflix co-CEO Ted Sarandos announced at the international ad festival Cannes Lions that the company will soon be testing an ad-supported, low-tier subscription plan. Netflix is currently in talks with several partners about the introduction into the ad world, including Google, Comcast, and NBCUniversal.
“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,’” Sarandos said. “We’re adding an ad-tier. We’re not adding ads to Netflix as you know it today.”
Introducing ads is expected to boost revenue for the streaming giant in the middle of a tough year. Netflix lost 200,000 subscribers in the first three months of 2022, and the company’s stock plunged more than 70% this year, wiping nearly $70 billion of its market capitalization and spurring shareholders to file a lawsuit against Netflix for misleading investors about declining subscriber growth.
The idea for an ad-supported, low-tier subscription has been in the works as early as April. On a first-quarter earnings call in April, Netflix co-CEO Reed Hastings suggested that ads could be on the way in the next year or two. “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,” he said. “And allowing consumers who like to have a lower price, and are advertising tolerant, to get what they want makes a lot of sense.”
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