Netflix ads are coming: Ad-supported streaming plans down the line

Netflix ads are soon to be implemented as lower-cost, ad-supported alternative packages, co-CEO Reed Hastings stated during the company’s Q1 earnings interview, after years of maintaining subscription-only plans, and in fear of massive subscriber loss.

Hastings predicted that the firm will fully flesh out its ad-supported streaming approach in the next year or two, adding “but think of us as quite open to us offering even lower prices with advertising as a consumer choice.”

Hastings’ statements on Netflix’s ad-supported plan came at a time when the firm’s subscriber growth has stagnated, with the streaming platform losing 200,000 subscribers in Q1 of 2022, and an expected loss of another 2 million in Q2. Adding ad-supported options to viewers could give it an opportunity for further future growth, and new ways to monetize the estimated 100 million-plus homes that now stream using a single shared password.

“Those that have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription,” said Hastings. “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.”

Netflix seems to be emulating the business models of its largest competitors including Hulu, HBO Max, NBCUniversal’s Peacock, and Paramount+ who all offer ad-supported subscriptions.    Disney recently announced plans to launch an ad-supported Disney+ subscription service in the United States in late 2022.

“I don’t think we have a lot of doubt that [the ad model] works,” Hastings said.  “I’m sure we’ll just get in and figure it out — as opposed to test it and maybe do it or not do it.”

Netflix’s advertising strategy avoids the data-privacy concerns that have plagued some internet companies by relying on third-party technologies to match adverts to viewers without requiring access to personally-identifying information, according to Hastings.

Summary:

Netflix is on the path to implementing ad-supported packages in the wake of decreasing subscriber counts, and in an effort to explore additional revenue-generating models, matching the framework that many other large streaming services have adopted.