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Netflix Confirms Ad-Tier Option for Subscribers

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(Image credit: Pixabay)

Netflix made it official today that it will offer an ad-based lower cost subscription tier, with Co-CEO Ted Sarandos confirming the move while speaking at the Cannes Lions advertising festival, according to the Hollywood Reporter (opens in new tab).

The announcement confirms what the company has been hinting at for several months now since it announced a disappointing Q1 with a first ever loss of 200,000 net paid subscribers worldwide, way below its guidance forecast of 2.5 million net adds. The company reported a total of 221.64 million, up 6.5% from a year earlier. 

At the time, Reed Hastings, co-founder, chairman, president and co-CEO raised the idea of ad-supported (opens in new tab) plans saying, “those who 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. So that's something we're looking at now. We're trying to figure [it] out over the next year or two. But think of us as quite open to offering even lower prices with advertising as a consumer choice.”

This was the first time Netflix had appeared at the Cannes Lions advertising festival, a clear sign that it is serious about its efforts to increase revenues by adding an ad-supported tier that also includes a campaign to crack down on password sharing. 

“We’ve left a big customer segment off the table, which is people who say: ‘Hey, Netflix is too expensive for me and I don’t mind advertising,'” Sarandos said at the festival. “We are adding an ad tier; we’re not adding ads to Netflix as you know it today. We’re adding an ad tier for folks who say, ‘Hey, I want a lower price and I’ll watch ads.'”

Tom has covered the broadcast technology market for the past 25 years, including three years handling member communications for the National Association of Broadcasters followed by a year as editor of Video Technology News and DTV Business executive newsletters for Phillips Publishing. In 1999 he launched digitalbroadcasting.com for internet B2B portal Verticalnet. He is also a charter member of the CTA's Academy of Digital TV Pioneers. Since 2001, he has been editor-in-chief of TV Tech (www.tvtech.com), the leading source of news and information on broadcast and related media technology and is a frequent contributor and moderator to the brand’s Tech Leadership events.