Netflix already raised its prices earlier this year, but it’s about to start taking the one thing from customers that’s more valuable than money: time.
The New York Times reported in May that the streaming giant told employees that an ad-supported subscription plan could roll out by the end of 2022. This version of Netflix would cost less than the standard $15.49/mo subscription, though the exact discounted monthly price isn’t known yet. There’s already a $9.99/mo tier that doesn’t include HD streaming, so perhaps this would replace or even undercut that one.
On Thursday, Netflix co-CEO Ted Sarandos confirmed the streaming giant would indeed be adding the ad tier, speaking to Sway podcast host Kara Swisher at the Cannes Lions global advertising festival, per The Hollywood Reporter.
“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, as reported by the news outlet. “We’re 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.'”
Google’s Alphabet Inc. and Comcast Corp.’s NBCUniversal are the two top competitors to help Netflix build the ad tier, according to The Wall Street Journal.
That Netflix is going to introduce ads doesn’t come as a surprise. In April, co-CEO Reed Hastings indicated the company would look into offering this cheaper subscription option. However, at the time, the rollout for the ad-supported tier was targeted to debut “over the next year or two.” Now we know it could arrive sometime this fall. Including this option would put Netflix on par with services like Hulu, HBO Max, Disney+, and Paramount+, all of which have cheaper subscriptions with ad breaks.
Everything coming to Netflix in July
That said, the timing of this news isn’t a great look for Netflix, which has announced a number of somewhat anti-consumer policy changes in recent months. Aside from jacking up prices (4K streaming costs $19.99/mo, while other services like HBO include it for free), Netflix also wants to hike up costs for users who share their passwords with other people. The inclusion of a totally optional and cheaper ad-supported version of Netflix isn’t on the same level as that, but the optics of the biggest streaming service suddenly reversing course on ad inclusion aren’t great.
Of course, we all know why Netflix is doing this stuff: The service lost 200,000 subscribers in the first quarter of the year and it expects to lose two million more next quarter. That’s what happens when you let go of shows like Frasier and King of the Hill.
UPDATE: Jun. 23, 2022, 12:57 p.m. EDT Added co-CEO Ted Sarandos’ confirmation on June 23 that Netflix would be adding the ad tier. The story above has been updated to include this.