In May, it was reported that Netflix lost 200,000 subscribers last quarter and is predicted to lose an estimated two million in this current quarter. Now, the company is planning to launch a lower-priced ad-support tier for users. Its competitors Peacock, Hulu, HBO Max, and Disney+ also offer ad-supported subscriptions.
Following Netflix’s loss of 200M subscribers, it is making plans to monetize the service
As reported by The Wall Street Journal, Netflix Co-CEO Ted Sarandos confirmed that the company is in talks with multiple potential partners to help it launch an ad-supported tier. The WSJ writes:
When asked about partnership talks with ad companies on Thursday, Mr. Sarandos replied, “We’re talking to all of them right now. We want a pretty easy entry to the market—which, again, we will build on and iterate in,” he added. “What we do at first will not be representative of what the product will be ultimately. I want our product to be better than TV.”
Though Netflix has been against adding ads to its service, the amount of subscribers it has recently lost and is forecasted to lose in the coming months might not leave it with another option.
The service losing subscribers while the streaming market continues to see growth is likely due to increasing the cost of its subscription plans bringing its basic plan to $9.99/ month (from $8.99), its standard plan to $15.49/ month (from $13.99), and its premium tier to $19.99/ month (from $17.99).
In addition to this, the company recently announced that it would be cracking down on password sharing which will see users cancel their subscriptions or opt for a cheaper subscription plan. And since the company is hemorrhaging subscribers, an ad-supported tier sounds like the most logical move.
Despite the news of ads coming to Netflix, consumers should not be concerned. First of all, ads will not be coming to the premium tier. Secondly, attracting new users with a low-cost tier while generating revenue from ads is good news for viewers as more money ultimately means the company will have a bigger budget to produce more original shows like Stranger Things, Sex Education, and more. It would also mean that beloved shows won’t see a cancellation after the first season.