Netflix May Launch Ad-Supported Plan in Q4 2022

Netflix may dive into the ad-supported VOD space as soon as the fourth quarter of 2022 — sooner than it originally signaled.

Last month, as Netflix reported an unexpected drop in streaming subscribers in Q1 and forecast a 2 million sub loss for the second quarter, the company announced plans to roll out a lower-cost version of its streaming service with ads. Co-CEO Reed Hastings told investors at the time that Netflix would “figure out” the AVOD strategy “over the next year or two.”

The company has evidently accelerated that timeline: Netflix informed employees of a Q4 target date for the ad-supported tier in a recent memo, the New York Times reported, citing two anonymous sources. A Netflix rep declined to comment.

No details have come to light about what Netflix’s AVOD tier would cost or how advertising would be presented. In the US, Netflix’s standard two-stream HD plan is $15.49/month. The company will continue to offer ad-free packages to customers worldwide.

Some of Netflix’s biggest competitors already offer cheaper, ad-supported plans, including Hulu, HBO Max, NBCUniversal’s Peacock and Paramount+. In addition, Disney has outlined plans to launch an ad-supported version of Disney+ starting late in 2022 in the US

Netflix’s embrace of AVOD comes after years of execs insisting the streamer wouldn’t introduce ads into the streaming-video experience. But its recent paid-subscriber slowdown — which precipitated the biggest-ever decline in Netflix stock — clearly changed the calculus.

“Those that have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription,” Hastings said on Netflix’s Q1 earnings interview on April 20. “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.”

Netflix does not “have a lot of doubt that” the advertising model works, Hastings added, citing Hulu and HBO Max’s AVOD tiers and the upcoming plans for Disney+. “I’m sure we’ll just get in and figure it out — as opposed to test it and maybe do it or not do it.”

In another move to try to boost revenue, Netflix is ​​looking at ways to get paid by the estimated 100 million-plus households that currently use a shared password to access the service. The company could generate an additional $1.6 billion per year if it can successfully convert freeloaders into paying customers across its global footprint, according to one analyst estimate.

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