Netflix has apparently confirmed that it’s planning to add an ad-supported subscription tier to try and turn around its declining fortunes.
The company has been rumoured to be making preparations for ads for quite a while, so the news is not that much of a surprise. Netflix had long been opposed to bringing ads to its platform, however it has now been confirmed that it will introduce a new, lower-priced tier that will offset the lower cost by showing viewers third-party ads.
The announcement came via The Hollywood Reporter in an interview with Netflix co-CEO Ted Sarandos at the Cannes Lions advertising festival. Sarandos was reported to have confirmed that “we’re adding an ad tier.”
The co-CEO went on to explain that the tier is designed for those who say “Hey, I want a lower price and I’ll watch ads”.
What that means is that existing subscribers won’t see any changes to their current service. However, customers will soon gain the opportunity to switch to a cheaper plan if they’re willing to suffer the advertising bombardment that it will bring.
Netflix’s move has been expected for some time as its first quarter earnings report showed that it had lost around 200,000 subscribers worldwide between January and March. It’s expected that it will announce another two million subscribers costs when it reports on its second quarter.
That’s not to say Netflix is in a major crisis. It still had 221 million subscribers at the last count in March, and its first quarter profit was healthy at more than $1.6 billion. However, Netflix’s shareholders made their concern over the declining numbers very clear, forcing executives to try and do something to stem the exodus.
Recently, it was reported that Netflix is negotiating to buy Roku, which is best known for its streaming devices but also has a very successful advertising platform.
Sarandos was however keen to point out the possibilities Netflix has for additional growth. He told Hollywood Reporter that streaming content only accounts for about 10% of what people do on TV, and said there were plenty of other growth avenues for the company to explore. As to what they will be, he didn’t elaborate.
Speculation will now likely turn to the cost of Netflix’s new, cheaper tier. At present the Basic subscription costs £6.99 a month in the U.K., with the Premium 4K/HDR package priced at £15.99. So we’re probably still looking at a few quid. Whether or not people are enticed to sign up for it may well depend on how intrusive and frequent Netflix’s ads actually are.
