One of the best things about Netflix as a streaming company is that there are no commercials. You can happily watch whatever you want, as much as you want, and you’ll never have to watch a single advertisement. Sadly, that all seems to be changing, as Netflix has announced plans to introduce cheaper, ad-supported plans after losing more than 200,000 subscribers during its first quarter this year. Needles to say, not everyone is a fan of the idea.
- CEO Reed Hastings announced the plans on the Netflix quarterly earnings call on April 19. Hastings believes that introducing cheaper plans that are supported by advertising is the easiest way to retain customers and introduce new ones to the company’s offerings. He described it as an “exciting opportunity for us” but adds that the idea is still in its preliminary stages.
- These plans won’t be available right away. Hastings said on the call that Netflix execs will be looking into potential ad-supported plans “over the next year or two” to find the best ones for the company’s customer base. This will require a lot of research as well as extensive testing to make sure they get it right.
- Hastings wants to offer consumers choices. There’s no denying that the cost of living is going up around the world while wages definitely are not. That means people are thinking harder about how their money is being spent and are looking to save cash wherever possible. “Those who have followed Netflix know that I have been against the complexity of advertising, and a big fan of the simplicity of subscription,” Hastings said, as per the Hollywood Reporter. “But as much as I am a fan of that, I am 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.”
- Plenty of Netflix’s competitors already have ad-supported plans in place. The success of this format by other streaming services is what brought Hastings around to the idea. “It is pretty clear that it is working for Hulu, Disney is doing it, HBO did it. We don’t have any doubt that it works,” Hastings explained. He went on to say that he planned to have a variety of plans like Hulu does that allow consumers to choose whether they want a cheaper, ad-supported option or to pay more to remain ad-free.
- Hastings also promised not to get into data tracking and selling. While other publishers use data tracking to match ads to consumers that are more appropriate to them, Netflix plans to do so as an individual publisher. “In terms of the profit potential, definitely the online ad market has advanced, and now you don’t have to incorporate all the information about people that you used to. We can stay out of that, and really be focused on our members, creating that great experience,” he explained.