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Netflix Aims to Launch Ad-Supported Subscription Tier in 2022

In the age of streaming, Netflix has largely remained steadfast in two things: no ads and full season drops. But the time has come for Netflix to make some serious changes. In a Q1 shareholder letter, the streaming platform acknowledged it lost subscribers for the first time in a decade. It lost 200,00o in Q1 and is on track to lose up to 2 million by the end of Q2. But in the company’s Q1 2022 Earnings Interview, which is on YouTube, executives announced the subscription shake-up. Netflix is officially adding an ad-supported tier. And according to a new report, it could arrive by the end of 2022.

Netflix

Netflix’s Ad-Supported Plan Gets Early Arrival

This is a stark change of pace, considering co-founder and co-CEO Reed Hastings—a long holdout on ad-support plans—indicated the new subscription would arrive in a year or two. During Netflix’s Earnings Interview in April 2022, Hastings admitted the company needed to embrace ads in one way or another in order to make money.

Hastings said:

One way to increase the price spread is advertising on low-end plans and to have lower prices with advertising. 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. 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 out over the next year or two. Think of us as quite open to offering even lower prices with advertising as a consumer choice.

However, in an internal memo, which we first heard about at The New York Times, Netflix revealed plans to roll out the new plan during the last three months of 2022. This is a remarkable timeline shift for the company, given Hastings comments occurred just a few weeks ago. However, Netflix still isn’t offering specifics. So at this point, we don’t know much about the new price point, other than it’ll be a cheaper offering. Currently, Netflix’s current price models boast different features—from video quality to the number of devices available. 

Netflix

Netflix’s Current Subscription Plans

Currently Netflix’s subscription model offers three different rates: basic, standard, and premium. Here’s how they break down:

Basic

Currently the cheapest model, the basic subscription costs $9.99 per month. Subscribers can only watch content on one device—TV, computer, phone, or tablet—at a time. Netflix calls its video quality “good” with 480p resolution.

Standard

The middle price point, standard costs $15.49 per month. As the middle child the video quality is better than in the basic plan, with 1080p resolution. (But it pales in comparison to the premium plan.) Plus, subscribers can watch content on two devices—TV, computer, phone, or tablet—at a time.

Premium

Currently Netflix’s top subscription package, it costs $19.99 per month. And with a 4K and HDR resolution, it features the best video quality the streaming platform offers. And with its heftier price, more people can watch at once. Subscribers can watch content on four devices—TV, computer, phone, or tablet—at a time.

Netflix

How Netflix’s Password Sharing Crackdown Factors in

This all comes just a month after Netflix started testing a plan to crack down on password sharing in Costa Rica, Peru, and Chile. The streaming service is rolling out ways to cut off sharing passwords between households. In doing so, Netflix is testing ways to offload extra users accessing an account in a home they don’t live in. One solution allows the subscriber to add an extra member for a fee. Another, invites the impeding profile to start a new account while keeping their curated profile. According to The New York Times, this crackdown strategy will go into effect globally around the same time the new subscription tier launches.

In the Earnings Interview, Peters made it quite clear that this strategy will eventually go global in the next year or so. It certainly would make sense to have an even cheaper model design underway as Netflix looks to finally offload the person using their neighbor’s sister’s ex-boyfriend’s account. And by adding another model–one hopefully in a shiny, feasible price range—the streaming platform could retain users but actually bring in the revenue. Still, there’s a lot for the platform to work out in the meantime. But as long as their ads aren’t overwhelmingly loud, people may just accept them.

Originally published on April 20, 2022.

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