Netflix reportedly accelerating timeline for introduction of ad-supported tier

Netflix is looking to accelerate its timeline for launching an ad-supported tier and could roll out lower-priced plans before the end of the year, according to a report from the New York Times.

Reed Hastings

Citing an internal memo sent to staffers, the newspaper reported that Netflix is also aiming to begin its previously announced password-sharing crackdown at around the same time.

The report comes three weeks after co-founder, chairman and co-CEO Reed Hastings revealed during an investor call that the streaming giant, after years of shunning the notion of introducing ads on its service, will look to introduce an AVoD tier.

“Those who have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription,” said Hastings during the investor call on April 19.

“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 to get what they want makes a lot of sense. So that’s something we’re looking at now. We’re trying to figure [it] out over the next year or two.”

Now it seems Netflix will accelerate its plans to introduce ad-supported subscription options, bringing it onto a similar timeline as Disney’s streaming product Disney+, which is planning to add an AVoD tier before the end of the year.

Hastings revealed Netflix’s intention to feature ads after it shed 200,000 subscribers in the first quarter, marking the first time in a decade that its global subscriber count has fallen. The losses were partly caused by the suspension of its service in Russia, which accounted for 700,000 subscriptions.

The subscriber losses, coupled with the disclosure that it expects to lose a further two million subs in the second quarter, have sent Netflix’s share price crashing in the time since. The publicly traded company was trading at around US$177 per share on Tuesday, down from around US$345 per share in mid-April. In November, Netflix shares were trading as high as US$700.

Netflix has started to implement cost-cutting measures across several areas of the company, notably with the cancellation of a pair of animated kids’ shows already in production, Boons & Curses and Dino Daycare. Development on an animated series from Meghan Markle’s Archewell Productions was also scrapped and the Steve Carell-led comedy Space Force was cancelled, in addition to layoffs in its marketing department and its editorial brand Tudum.

During its first-quarter investor call, Netflix execs pointed to a crackdown on password sharing as a means of spurring growth in its subscriber base. According to Netflix, there are 100 million households that access the service without paying for it. As of March 31, the streamer has 221.6 million paid subscriptions.

Earlier this week, UK firm Digital TV Research released a report indicating that AVoD revenues from series and features will jump to US$70bn in 2027, up from US$33bn in 2021. The report also said US AVoD revenue will grow by US$19bn to US$31bn by 2027.

A Netflix representative declined to comment.