Netflix has kept its platform ad-free for years, but that might change by the end of 2022. As part of its plans to make the platform more accessible for consumers to stream movies and TV shows, Netflix is working on a more affordable tier with ads.
The ad-supported tier might have various repercussions for Netflix and its users. Here are the pros and cons of Netflix's ad-supported tier.
Netflix Is Working on an Ad-Supported Subscription Plan
Netflix's Co-CEO Ted Sarandos officially confirmed to the public that it's working on an ad-supported tier in June 2022 at the Cannes Lions advertising festival. This was after rumors of the company working on such a tier had surfaced months earlier. The new lower-priced ad-supported subscription plan will be an addition to the available basic, standard, and premium plans, which cost $9.99, $15.49, and $19.99, respectively.
On July 13, 2022, the streaming platform selected Microsoft as its global advertising technology and sales partner moving the company a step closer to launching its ad-supported tier. Despite that, according to what Greg Peters, Netflix's Chief Operating Officer and Chief Product Officer wrote in Netflix's announcement, "it's very early," as the company still has much to work on.
As such, it's still unclear how a Netflix ad-supported plan would work. However, the goal, according to Peters, is to offer "more choice for consumers and a premium, better-than-linear TV brand experience for advertisers."
The Pros of a Netflix Ad-Supported Plan
The major advantage of an ad-supported tier will be the lower price, which is Netflix's main pitch behind its plans. To the streaming giant, such a plan could help the company increase its subscriber count. From its 2022 report, Netflix has over 200 million subscribers, despite losing about 200,000 in the first quarter of 2022.
One of the reasons why Netflix is losing subscribers is price hikes. At the start of 2022, Netflix hiked prices in the US, Canada, and other parts of the world. Lowering the price can help Netflix retain users who may be mulling over canceling their subscriptions and even attract new users who have been sitting on the fence due to its expensive subscription prices as long as they can put up with ads.
Cheaper ad-supported tiers aren't new. Most of Netflix's streaming competitors like HBO Max, Hulu, Paramount+, Discovery+, and Peacock have cheaper ad-supported plans. Following the trend will likely also help Netflix stave off the competition, which has heavily benefited from such plans. To do so, Netflix still has to ensure the pricing on its ad-supported tier is competitive to make it attractive to potential users.
The Cons of an Ad-Supported Plan
Ads can be a good way for products and services to maintain and attract more users, but they don't come without disadvantages. Ads can be intrusive, which is not surprising why some always prefer to avoid them by paying. Depending on how Netflix will implement it, the ad-supported tier might harm the platform's amazing user experience that we've come to know and love.
There's also a risk that the company might bring ads to the basic and standard tiers in exchange for not hiking prices in the future, especially if the ad-supported tier becomes successful. If history is anything to go by, it seems the price of streaming content on Netflix is always increasing. Price hikes on Netflix have become normal as the company is forced to invest more to produce original content despite stalling growth. For reference, Netflix has hiked its prices thrice since 2019.
While this trend is alarming, the company is not alone. Other services, including Disney+, Hulu, Sling TV, YouTube TV, and Prime Video, have also hiked prices in the past few years. Therefore, it may not be surprising to see a future where nearly all, if not all, streaming tiers across platforms are filled with ads, all in the name of making it more affordable for everyone to watch content online.
Netflix’s Ad-Supported Tier Is an Answer to the Rising Cost of Streaming
With the streaming industry getting competitive by the day, Netflix is betting on investing more in original programming. That investment has to be recovered by increasing the subscription costs or adding more paying subscribers. It seems that Netflix has exhausted the first option, and it has become harder for the company to grow or maintain its subscription numbers.
Launching a cheaper ad-supported tier will potentially help the company maintain its subscribers and attract even more while still making up for the difference by allowing other companies to run ads on its platform.