After years of rejecting calls for an ad-supported streaming tier, Netflix co-founder and co-CEO Reed Hastings said on Tuesday’s earnings call that the company is “quite open to offering even lower prices with advertising, as a consumer choice.”
Apparently, the company is now looking into the option and “trying to figure out over the next year or two.” Hastings admits that introducing an ad-supported tier would be a big change in thinking for the company, saying that he’s historically been “against the complexity of advertising and a big fan of the simplicity of subscription.”
Hastings now pitches the idea of an ad-supported tier as something that “makes a lot of sense” for “consumers who would like to have a lower price and are advertising tolerant.”
After Tuesday’s news that it lost subscribers for the first time in a decade, Netflix seems open to a lot of things that it had rejected — co-CEO Ted Sarandos even laid out what might be necessary for a long-rumored move into live sports. Quoted by Deadline, he said “I’m not saying that we’ll never do sports but we’ll have to see a path to growing a big revenue stream and a great profit stream with it,” which is a significant shift from the flat no Netflix has previously offered.
Netflix would be far from the only company to introduce an ad-supported tier. Competitors like Hulu, Peacock, and even HBO Max offer plans that let consumers pay less (or, in Peacock’s case, nothing) in return for having their shows occasionally interrupted. Disney has also announced that it’s adding an ad-supported option to Disney Plus by the end of the year.
Currently, Netflix charges $10 a month for its basic tier, $15.49 a month for its standard tier, and $20 a month for its premium tier. These prices are relatively new — the company bumped them up in March. During the call, Hastings says he’s proud of Netflix’s “price spread,” but as we laid out in January, the company’s deep market penetration means it has limited options to try to make more money outside of raising prices again and again. Introducing a cheaper, ad-supported tier (as well as trying to cut down on password sharing) could be part of the company’s plan to increase its number of customers, and introduce another revenue stream.
Disclosure: The Verge is currently producing a series with Netflix.
Update 7:18PM ET: Added note about Ted Sarandos referencing live sports.