What you need to know
- Reed Hastings, Netflix's co-founder and co-CEO, is open to a lower-cost tier.
- The cheaper streaming plan will be geared toward "advertising-tolerant" customers.
- Netflix plans to explore the option in the next two years.
While other major streaming services, such as HBO Max and Hulu, already have ad-supported tiers, Netflix has consistently refused to do so. However, this could change in the future, as the company is now considering adding a lower-cost, ad-supported tier to its offerings.
Netflix's co-founder and co-CEO, Reed Hastings, said during its first-quarter earnings call on Tuesday that the streaming platform is open to offering a cheaper plan with ads (via Variety). It marks a major shift in the company's business model after years of resisting calls for a lower-cost tier.
“Those that have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription,” Hastings said. “But as much as I’m a fan of that, I’m a bigger fan of consumer choice. And allowing consumers who would like to have a lower price and are advertising-tolerant get what they want, makes a lot of sense.”
Hastings' change of mind comes as the company's subscriber base has taken a hit for the first time in 10 years. Netflix reported a 200,000-subscriber loss in the first quarter of 2022, a setback that could worsen in the following quarter. In a letter to shareholders, the streaming giant stated that it expects to lose 2 million subscribers in the second quarter.
The company partially blames password sharing for its struggling subscriber base. However, it's worth noting that the decrease came just a few months after the company raised subscription prices for customers in the United States and Canada.
It's unclear how much the ad-supported tier will cost. For context, the service's standard tier currently costs $15.49 per month and its premium tier costs $20 per month. The cost of the upcoming new plan is very likely to be within that range.
However, it is only one component of Netflix's efforts to increase revenue. The service recently announced that it would begin charging customers a fee for sharing passwords with others.
Netflix expects to finalize its ad-supported streaming package over the next two years. It will be a welcome change for customers willing to forego an uninterrupted streaming experience in order to save a few dollars. As Hastings pointed out, it's "a consumer choice."
