Netflix tells employees ads could arrive by the end of 2022

Netflix could introduce its low-cost ad-supported tier by the end of the year, a more accelerated schedule than originally stated, the company told employees in a recent memo.

In the memo, Netflix executives said they aim to introduce the level of advertising in the last three months of the year, said two people who shared details of the communication on condition of anonymity to describe the internal company discussions. The memo also said Netflix planned to start cracking down on password sharing among its subscriber base around the same time, the people said.

Last month, Netflix stunned the media industry and Madison Avenue when it revealed it would start offering a cheaper subscription with ads, after years of publicly stating that ads would never be seen on the platform. streaming.

But Netflix faces significant business challenges. Announcing its first quarter results last month, Netflix said it lost 200,000 subscribers in the first three months of the year – the first time this has happened in a decade – and expects to lose more. two million more in the coming months. Since the announcement to subscribers, Netflix’s stock price has fallen sharply, wiping out around $70 billion of the company’s market capitalization.

Reed Hastings, co-chief executive of Netflix, told investors the company would look into the possibility of introducing an ad-supported platform and would try to “find that out over the next two years.”

The recent memo to staff reported that the timeline has accelerated.

“Yes, it is fast and ambitious and will require compromises,” the note reads.

A Netflix spokeswoman declined to comment.

Netflix offers a variety of payment tiers for streaming access; its most popular plan costs $15.49 per month. The new ad-supported tier will cost less. Other streaming services have similar plans. HBO Max, for example, offers an ad-free service for $15 per month and charges $10 per month for the ad-free service.

Indeed, in the memo to employees, Netflix executives invoked their competitors, saying HBO and Hulu were able to “maintain strong brands while offering an ad-supported service.”

“Every major streaming company except Apple has or has announced an ad-supported service,” the note reads. “For a good reason, people want cheaper options.”

Netflix has also discussed its interest in building out-of-home ad infrastructure, including with a company called The Trade Desk, which helps advertisers place ads on various internet platforms, a person familiar with the discussions said. who spoke on condition of anonymity in order to describe them. The Trade Desk counts David Wells, Netflix’s former chief financial officer, as a board member, and has been in contact with Netflix for years, the person said, but talks intensified recently, after Netflix has publicly stated that it will create a floor ad.

Last month, Netflix also announced plans to start charging higher prices to subscribers who shared their account with multiple people.

“So if you have a sister, say, who lives in another city — you want to share Netflix with her, that’s great,” Netflix chief operating officer Greg Peters said on the call. company results. “We are not trying to stop this sharing, but we will ask you to pay a little more to be able to share with her.”

Peters said the company would spend “about a year of iteration” on password sharing before rolling out a plan.

In the memo to employees, Netflix executives said the ad-supported tier would be introduced “in parallel with our broader sharing billing plans.”

Tiffany Hsu contributed report.

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