Confirmed: ads will appear on Netflix
Netflix co-CEO Ted Sarandos has confirmed what has been an open secret for a while; ads come to Netflix.
According to The Hollywood ReporterSarandos confirmed reports leaked in the second week of May and revealed that a cheaper, ad-supported Netflix tier is on the way.
In this respect, things have moved quickly for Netflix in 2022. Back in early March, the company’s CFO Spencer Neuman was asked about the prospects for an ad-supported level, and he went so far as to say he “can never say never” when asked about the idea, before quickly adding that it is “not something in [the brand’s] plans right now.
Then on April 20, during an earnings call, Sarandos’ co-founder, fellow Netflix co-CEO Reed Hastings, revealed that the streaming service was “quite open” to the possibility of an ad-supported tier and could “assume it will come out in over the next year or two.”
Now, however, the ads are coming in, and Sarandos is saying onstage at the five-day Cannes Lions industry festival that’s taking place right now that he wanted to get a “big segment of customers.” He also confirmed that the level would be a standalone offering and ads would not start showing up on existing Netflix subscribers’ accounts.
Asked about ads on the platform, Sarandos said: “We’ve eliminated a large segment of customers who are like, ‘Hey, Netflix is too expensive for me and I don’t mind ads. We’re adding an ad layer, we’re not adding ads to Netflix as you know it today. We’re adding an ad layer for people who say, “Hey, I want a lower price and I’ll watch ads.”
He hasn’t given any details about when the ad will hit Netflix, but if previous reports are correct, it will be before the end of 2022.
Sarandos was also optimistic about the company’s outlook, adding that Netflix “…has enough scale, profitability and free cash flow to keep growing this business.”
The move comes as Netflix hopes to win back subscribers who have been discounted by the increase in monthly subscription fees and to bring in people who haven’t tried Netflix yet.
It is also looking to increase revenue after it was announced in late April that it has lost 200,000 subscribers since the start of 2022, sending its value down by more than $70 billion.
An ad-supported cheaper tier is not a revolutionary idea for a subscription service. Hulu, HBO Max, Paramount Plus, and Peacock are already doing this, and Disney Plus will also introduce the option this year.
Analysis: New level, right move?
It was the only way to deploy Netflix ads on its platform without causing a tidal wave of anger among existing subscribers. The idea that subscribers who get the streaming service’s basic offer will accept the prospect of an ad popping up suddenly in the middle of an episode of Stranger Things is delusional.
Sarandos only confirmed the fact that there will be ads, he didn’t say how much the ad-supported subscription tier would cost, how often the ads would appear, and how long the ad breaks would last, in all likelihood this is because Netflix execs were also hesitant.
Over the past week, there have been reports of Netflix meeting with companies like Google, Roku and parent company Universal Comcast as they are trying to match our plans to include commercials on the service.
On the face of it, Netflix will be very attractive to advertisers, with over 220 million subscribers worldwide and a huge amount of customer data to accurately target ads to age, location, and customer likes and dislikes. Do you watch a lot of Netflix travel shows? You may well find yourself seeing an advertisement for a sun holiday. It could be something specific.
Netflix needs to change something. The cost-of-living crisis has caused people to become more choosy about their streaming services, and the price increase in March of this year didn’t help.
If advertising saves Netflix from having to cancel so many shows and lay off staff, then it will be a good decision. We just need to see how much it costs and how many ads they want us to see…
