Ads are coming to Netflix, and it’s possible they’ll be here sooner than first thought. Per a report fromThe New York Times, Netflix executives reportedly have told employees that an ad-supported tier of the streaming service is being planned for a rollout sometime in the last three months of 2022. That’s a lot quicker than what investors were told in the company’s earnings call on April 19.
Netflix co-founder and co-CEO Reed Hastings told investors that the company would take the “next year or two” to figure out thepossibility of ads on Netflix. The other Netflix executives during the company’s recent earnings calls also didn’t rule out the possibility of an ad-supported tier, but there was no hint that the dramatic business shift could happen as early as this year.
“I’m a bigger fan of consumer choice,” Hastings said on the call. “And allowing consumers who would like to have a lower price and are advertising-tolerant get what they want makes a lot of sense. So that’s something we’re looking at now. We’re trying to 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.”
But that’s just half of the concern. Netflix often has gloated about the quality and diversity of its content library. But its heavy investment in regional content, especially in markets like India, hasn’t really proved to be the kind of critical and commercial success story that could revive its dwindling fortunes in the face of fierce competition.
Ads may not be a terrible idea
Netflix knows all too well that the road to streaming glory is lined with blockbuster content starring marquee talent, but walking that path requires some handsome paychecks. Going on a mad production spree with investors’ money to one-up the likes of Apple, HBO, and Disney is a huge risk. But if a share of that production money comes from ad partners, Netflix has a chance to keep investors happy and also work on its ambitious content plans.
Netflix has continued to raise its subscription prices over the past few years to keep its production machinery running. But in doing so, it has also driven away customers due to the high asking price for its subscription. A cheaper ad-supported tier might win some of them back as well. At the end of the day, options are always a good business strategy.
