Netflix plans to launch a cheaper ad-supported subscription service sometime in the next two years, says the company’s co-chief, Reed Hastings. The announcement was made in Netflix’s Q1 earnings interview and follows the news that the streaming giant lost 200,000 subscribers globally in the first quarter of 2022.
Historically, Netflix has always favored an ad-free service, fully supported by users' subscriptions. However, while it was easy to sustain this position when Netflix dominated the streaming scene, it has become hard not to consider other ways to attract new customers in a market that’s saturated with options. That’s why Hastings declared that the company is reviewing its price policy, which could increase the subscription of clients who chose to share their accounts and the offer of a cheaper ad-support service. According to Hastings, these changes will allow clients to decide how they want to use Netflix, which in turn could help the company hold its ground against other streaming services. In Hastings' words:
“Those that have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of 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 price and are advertising-tolerant get what they want, makes a lot of sense.”
Although Netflix plans to offer an ad-supported subscription tier, the company doesn’t want to handle the ad choices itself. Instead, as Hastings puts it, the idea is to expand Netflix’s service to a new monetizing model by offering ad space that third-party companies can fill. In this scenario, Netflix would only serve as a canvas for marketing companies and would not collect user data themselves to tailor the ads to the customer’s taste. As Hastings explains it:
“In terms of the profit potential, definitely, the online ad market has advanced and now you don’t have to incorporate all the information about people that you used to. So we can be a great publisher and have other people do all the fancy ad-matching and integrate all the data about people … so we can stay out of that.”
Offering an ad-supported subscription tier is only the latest change Netflix has introduced to improve its services. Last year, the company started providing video games to their subscribers for no extra cost to expand their service and reuse their biggest franchises as a new marketing tool. Netflix has also been updating its user interface by creating a double-like button that helps clients better tailor their viewing experience and even adding a shuffle button to help the audience overcome choice paralysis. Considering how Netflix has also been expanding its catalog of original movies and TV shows, it looks like the company is more than ready to face the fierce competition that emerged in the last couple of years.