Netflix is planning to implement a more affordable ad-supported tier to draw in customers who do not want to pay the $9.99 starting price for an ad-free plan, Netflix co-CEO Ted Sarandos confirmed at the Cannes Lions advertising festival today (via The Hollywood Reporter).
The plan is aimed at people who think that Netflix is too expensive and who don’t mind ads, with no changes planned for the existing Netflix tiers. “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. “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.’ “
Netflix is already in talks with ad-sales partners, and while Sarandos did not provide details on when the ad-supported tier might come out, Netflix has told employees internally that it is aiming for a launch before the end of 2022.
The Basic Netflix plan is priced at $9.99 and it offers 480p streaming, while the Standard plan is priced at $15.49 for 1080p resolution. Netflix’s most expensive Premium plan, priced at $19.99 per month, is the sole tier that offers 4K HDR streaming. Netflix is the only streaming service that charges extra for improved streaming quality, and the ad-supported tier would presumably offer streaming quality similar to the Basic plan.
In addition to offering an ad-supported tier, Netflix is planning on cracking down on account sharing. In select countries, Netflix has been testing an extra payment for those who share their Netflix accounts with people outside of their households.
In the first quarter of 2022, Netflix said that it lost subscribers for the first time in 10 years. Revenue growth “slowed considerably,” which the company blamed on “a large number of households sharing accounts” and “competition.” Netflix estimates that 222 million paying households are sharing with an additional 100 million households that are not being monetized. Netflix has confirmed that it plans to implement “more effective monetization of multi-household sharing” in the future.
Sarandos said that he believes Netflix could return to growth with the changes that are planned. “We have plenty of scale and profitability and free cash flow to continue to grow this business,” he said, suggesting that there’s “still a lot of room to grow.”