Netflix's New Ad-Based Tier Could Launch As Early As October, Report Says

The less expensive subscription offering could arrive in the final three months of 2022, Netflix reportedly said in a memo to workers.


Netflix has said it might introduce a less-expensive, ad-based option in the future, and it could arrive sooner than expected. Netflix management said in a recent note to employees obtained by The New York Times that the new ad-based tier could launch by the end of 2022, which is earlier than the company apparently planned.

Specifically, Netflix management said the ad-based tier may launch in the final three months of 2022, so sometime in the October-December window. 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 or not Netflix launches the ad-based tier in all markets all at once or if it's rolled out in waves remains to be seen.

For years, Netflix said it would not introduce an ad-based model, but the company announced a new way of thinking earlier this year after losing 200,000 subscribers. Netflix projects it will lose 2 million more subscribers in the months ahead. This has seemingly spooked analysts and investors, as Netflix's stock price has taken a big hit this year.

Regarding the new ad-based model, the note from Netflix management reportedly said, "Yes, it's fast and ambitious and it will require some trade-offs."

The NYT report said Netflix's new ad-based model would cost less than Netflix's existing most popular plan, which costs $15.50/month. HBO Max's ad-based model costs $10/month, while Peacock's plan with commercials costs $5/month.

The memo from Netflix management mentioned the competition and said, "Every major streaming company excluding Apple has or has announced an ad-supported service. For good reason, people want lower-priced options."

Netflix founder Reed Hastings said during a recent earnings call that an ad-based model could hurt the company's overall revenue because people who currently pay for an ad-free package might opt for a less expensive option.

"Once you start offering a lower-priced plan with ads as an option, some consumers take it. And we've got a big installed base that probably are quite happy where they are," he said.

As for password-sharing, Netflix plans to continue to crack down on this because there are more than 100 million shared accounts worldwide, and Netflix wants a piece of that.

Netflix made $29.7 billion in revenue and a profit of $5.1 billion in 2021, while Netflix's co-CEOs Ted Sarandos and Reed Hastings made more than $70 million in pay that year.

Beyond TV and film, Netflix is now buying video game studios to create games based on Netflix properties. Just recently, the company launched its latest game Relic Hunters: Rebels, in which players fight space ducks.

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