Streamer likely to offer multiple ad-supported tiers

Ted Sarandos at the 94th Academy Awards at the Dolby Theater in Hollywood, California on March 27, 2022.

Angela Weiss | AFP | Getty Images

Netflix likely to offer multiple ad-supported subscription plans in the future, co-CEO Ted Sarandos said on Tuesday, just weeks after the streaming giant unveiled its first ad-supported option.

For viewers who don’t want to watch ads, Netflix already offers several plans ranging from $9.99 to $19.99 per month. And the company will likely do the same for its advertising model as the business grows, Sarandos said at the UBS TMT conference.

“Today we have multiple tiers, so we will probably have multiple tiers of ads over time, but there’s not much to talk about just yet,” Sarandos said. “And the product itself will evolve, I suspect, quite abruptly, but slowly, gradually.”

After resisting ads on its platform for years, Netflix released a cheaper $6.99 ad-supported variant last month with Microsoft. The move comes as Netflix struggles to find new ways to increase revenue as subscriber growth slows and competition intensifies.

In another attempt to boost revenue, Sarandos also said on Tuesday that the company will focus on addressing password sharing in 2023. Netflix reported that more than 100 million households, including 30 million in the US, use a shared password.

Sarandos likened the upcoming password-sharing cap to price hikes, which he said don’t please consumers. That’s why he said the company is focused on how to solve this problem in a way that makes customers “see the value of Netflix.”

“Today, there are people who use Netflix literally for free,” Sarandos said. “So, they benefit a lot from it. I think they will be happy to have their own account.”

Netflix priced its “basic with ads” variant slightly below the prices of its competitors. Subscribers in this tier are shown an average of four to five minutes of ads every hour and cannot download movies or series.

A limited number of TV series and movies are not initially available at the ad-supported tier due to licensing restrictions, but Sarandos said on Tuesday that about 90% are included and talks will begin soon to include the rest.

Last week, Netflix founder and co-CEO Reed Hastings admitted at The New York Times’ Dealbook conference that he didn’t initially believe in the ad-supported model of Netflix and was slow to embrace it.

“I was wrong about that. Hulu has proven that it is possible to do this on a large scale and offer customers lower prices. We included that,” Hastings said. “I wish we had changed this a few years earlier, but we’ll catch up.”

In addition to Hulu, streaming competitors like Warner Bros.’s HBO Max. Discovery, Peacock by NBCUniversal, and Paramount+ by Paramount Global offer cheaper, ad-supported subscription options. Disney+ also plans to launch an ad-supported tier, as well as raise the prices of its ad-free variant and other streaming services.

Disclosure: NBCUniversal Comcast is the parent company of CNBC.

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