Netflix co-CEO Ted Sarandos has confirmed in an interview at the Cannes Lions advertising festival that the company plans to introduce an ad-supported layer to its streaming service, The Hollywood Reporter reports. The New York Times reported last month that the company aims to roll out the new tier by the end of 2022.
“We’ve left a big customer segment off the table, which is people who say, ‘Hey, Netflix is too expensive for me and I don’t mind advertising,'” Sarandos says. “We [are] add an ad layer; we don’t add ads to Netflix as you know it today. We’re adding an ad tier for people who say, ‘Hey, I want a lower price and I’ll watch ads.’”
The streaming service is widely expected to launch an ad-supported subscription tier for its service since the other co-CEO Reed Hastings said he would be open to the idea in April.
“We’re adding an ad tier for people who say, ‘Hey, I want a lower price and I’ll watch ads.'”
Netflix’s plans to launch the new, cheaper tier follow news that it lost subscribers for the first time in more than a decade last quarter. The company reported a loss of 200,000 subscribers in the first quarter of 2022, compared to the fourth quarter of the previous year. It remains the largest streaming service with around 222 million subscribers, but the loss has forced Netflix to rethink its historically tough stance against ads.
Now the question is which ad sales company Netflix will partner with to help it enter the ad industry. Earlier this month, the Wall Street Journal reported that NBCUniversal and Google were two major contenders. When asked during the Cannes interview, Sarandos wouldn’t be drawn on who Netflix could partner with (“We’re talking to all of them now,” he said), but suggested the company could use a partnership as an interim measure. while it’s building its own ad business, according to the WSJ.
Sarandos was also asked if Netflix’s tanking stock price could make the company the target of a takeover. In response, the executive said it’s “always a reality” but claimed the company has everything it needs to grow again on its own. He also dismissed recent rumors that Netflix may be looking for a streaming hardware company like Roku. “We don’t need it,” Sarandos said, according to the WSJ.
Netflix’s plans for a cheaper, ad-supported tier mirror those of rival Disney Plus, which also hopes to launch a similar offering by the end of the year. Disney’s ad-supported tier is coming to the US first, before expanding internationally in 2023, and the company plans to limit ads to four minutes per hour. Prices for both Netflix and Disney’s new tiers have not yet been announced.
Disclosure: The Tech Warrior is currently producing a series with Netflix.