Netflix co-CEO Reed Hastings says the streamer is open to implementing an ad-supported, lower cost tier to the platform. Netflix first launched back in 1997 and quickly established itself as one of the first and most successful streaming services available to consumers. The streaming giant holds over 221 million subscribers worldwide and currently offers a three-tier plan option, ranging from basic ($9.99) to premium ($19.99).
Following the huge success of Netflix, other streaming services have emerged over the years in a bidding war to win over consumers. In recent years, Amazon Prime Video, Apple TV+, Disney+, Hulu, HBO Max, Acorn TV and more have all begun to gain traction. In fact, long before the Walt Disney Company released its Disney+ service in 2019, which exclusively features classic Disney content and original productions, the studio held a major stake in Hulu. Unlike Netflix in its current state, Hulu offers a basic ad-supported subscription service that grants access to their entire streaming library. While Hulu holds significantly less users (45.3 million worldwide), it appears Netflix may start taking cues from its successor.
The Wrap reports that during Tuesday's earnings call, Netflix co-CEO, Hastings, expressed interest in implementing an ad-supported lower cost tier in the same vein as Hulu. After acknowledging the success of Hulu's business model, Hastings said a similar plan could be phased in at Netflix "over the next year or two." Hastings also went on to mention the newly released ad-supported plan from HBO Max and added that he and the company "don't have a lot of doubt" that such a model works for streamers who take it on. Read Hastings' full comments below:
“Those who have followed Netflix know I’ve been against the complexity of advertising and in favor of the simplicity of a subscription. 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 choice and are advertising tolerant get what they want makes a lot of sense. That’s something we’re looking at now and figure out over the next year or two, but think of us as quite open to offering even lower prices with advertising as a consumer choice.”
This is somewhat of a walkback from the Netflix CEO, as Hastings has been known for his hesitance to introduce ad-supported tiers to the service in the past. However, on Tuesday's call, Hastings went on to acknowledge how the online ad market has "advanced," saying that some subscribers may happily choose a lower cost tier. Yet, Hastings was careful to mention that he doesn't believe such a move would be a "short term fix" towards attracting more consumers. This is of particular note considering the fact that Netflix had a weak start to the 2022 fiscal year, losing a reported 200,000 subscribers in Q1. The streaming service's current projections for next quarter may be even worse, potentially losing another two million.
For years, analysts have predicted ads could be on the horizon for Netflix. However, Hastings' comments are the first time that any Netflix executive has openly expressed interest in the idea. The new price that consumers could expect to pay for a lower cost service is not yet known. That said, those who are not interested in an ad-supported service can rest easy knowing that Hastings was careful to note that an ad-free option will still be available. Yet, if Netflix does implement a lower cost tier, it would be smart of the streamer not to raise the cost of its other tiers, less they run the risk of losing even more subscribers.
Source: The Wrap