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Netflix has reportedly told employees it plans to roll out an ad-supported tier by the end of this year, sooner than expected. Additionally, Netflix’s plan for an extra fee to fight password-sharing would roll out around the same time.
In a note to employees, “Netflix executives said that they were aiming to introduce the ad tier in the final three months of the year,” according to a New York Times report on Tuesday. The memo “also said that they were planning to begin cracking down on password sharing among its subscriber base around the same time.”
Netflix CEO Reed Hastings last month said the company plans to launch a lower-priced subscription tier with ads and will continue offering ad-free options. Hastings didn’t seem to think the ad-supported tier would roll out in 2022, saying it is something “we’re trying to figure out over the next year or two.”
“Those who follow Netflix know I’ve been against the complexity of advertising and a big fan of the simplicity of subscription,” Hastings said at the time. “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.”
As the NYT reported, the “recent note to staff signaled that the timeline has sped up. ‘Yes, it’s fast and ambitious and it will require some trade-offs,’ the note said.”
Netflix CEO said ads are “working for Hulu”
Netflix prices in the US currently range from $9.99 to $19.99 a month. A Netflix spokesperson declined to comment when contacted by Ars today.
Hastings last month said that ads are “working for Hulu. Disney’s doing it; HBO did it. I don’t think we have a lot of doubt that it works.” Hastings also said that when Netflix rolls out an ad-supported option, “it would be a plan layer like it is at Hulu so if you still want the ad-free option, you’ll be able to have that as a consumer. And if you’d rather pay a lower price and you’re ad-tolerant, we’re going to cater to you also.”
The memo to employees made a similar comparison to other streaming services, the NYT report said:
Indeed, in the note to employees, Netflix executives evoked their competitors, saying that HBO and Hulu have been able to “maintain strong brands while offering an ad-supported service.”
“Every major streaming company excluding Apple has or has announced an ad-supported service,” the note said. “For good reason, people want lower-priced options.”
Plan to fight password-sharing
Netflix revealed its plan to fight password-sharing in March with an extra fee of about $3 a month for users who share accounts with people in other households. The fee was set to roll out first in Chile, Costa Rica, and Peru.
The memo to employees described by the NYT report suggests that the fee could go worldwide later this year. The ad-supported tier will be introduced “in tandem with our broader plans to charge for sharing,” the memo said.
Netflix stock plummeted 37 percent on April 20 when Hastings announced the advertising plan and finished the day down 35 percent. The huge drop was also in response to Netflix revenue growth slowing amid a loss in subscribers.
Netflix stock was up about 4.5 percent today but hasn’t recovered from last month’s rout. The price was $348.61 at market close on April 19, fell to $226.19 on April 20, and was about $181 as of this writing.