Netflix's Ad-Supported Version Really Is Happening

The new tier will come to the streaming service sometime this year.

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Amid huge losses in subscribers and results allegedly negatively impacted by password-sharing, Netflix will soon be joining the other streaming services that offer an ad-supported tier. According to The Hollywood Reporter, Netflix's co-CEO Ted Sarandos revealed at the Cannes Lions advertising festival that the company intends to roll out the new tier by the end of 2022.

"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.'"

A Netflix internal memo obtained by The New York Times in May indicated that management is aiming to launch the new ad-based tier as early as October. At around the same time, Netflix will ramp up efforts to stop password-sharing, a mission the company has been on for some time already. Whether Netflix launches the ad-based tier in all markets at once or if it's rolled out in waves remains to be seen. According to CNBC, at Cannes, Netflix met with Google, Comcast and NBCUniversal, and Roku to discuss potential marketing partnerships.

Also in May, AMC Networks interim CEO Matt Blank seemingly scoffed at Netflix's belief that an ad-supported tier alone would turn their problems around. Blank said, "It's funny when you hear one other large player having trouble… all of a sudden an ad tier is going to solve all problems? We don't think that’s true, but we'll certainly monitor it."

However, at Cannes Lions, Sarandos also indicated that Netflix is turning to ad-supported tiers not as a panacea but as an experiment. The executive also insisted that Netflix's Q1 loss of 200,000 subscribers, expectation to lose 2 million in Q2, and the resulting stock freefall since is only part of the inevitable ups and downs in the still fairly young business of online streaming.

"We've gotten through experiences where the market disconnects from [our] core business and you have to prove the thesis still works, and is going to work long-term," said Sarandos. "There's a lot of uncertainty in the world today, and if they get anything that rocks the foundation of the narrative, they get nervous."

Check out what's coming to Netflix in July.

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