Ads are officially coming to Netflix.
Deadline reports that the streaming service will begin offering a cheaper subscription tier that includes advertisements beginning in “early 2023.” Netflix shared the news in a letter to shareholders accompanied by their quarterly earnings, writing:
The official announcement comes following a statement from Co-CEO Ted Sarandos at Cannes Lions in June, who indicated the upcoming change. The new tier is an attempt to hinder the slowing subscriber and revenue growth for Netflix, and amid addressing other factors such as cracking down on account sharing.
“[The] lower priced advertising-supported offering will complement our existing plans, which will remain ad-free. Our global ARM has grown at a 5% compound annual rate from 2013 to 2021, so it makes sense now to give consumers a choice for a lower priced option with advertisements, if they desire it.”
MOVIEWEB VIDEO OF THE DAY
The ad-supported tier will first launch to “a handful of markets where advertising spend is significant,” with the streamer acknowledging the new offering will be a work in progress. “Like most of our new initiatives, our intention is to roll it out, listen and learn, and iterate quickly to improve the offering,” the letter continued. “So, our advertising business in a few years will likely look quite different than what it looks like on day one.”
The streaming giant also touched on its collaboration with Microsoft, following last week’s announcement that the company would serve as Netflix’s technology and sales partner for the ad-supported tier rollout.
Netflix Co-CEO Admits Ad-Free Tier will be Limited
Though Netflix promises that ad-tier subscribers will have a “great experience,” Co-CEO and Chief Content Officer Ted Sarandos admits that the cheaper tier will not have access to the streaming service’s entire catalog.
Sarandos did not say which content might be included, though it’s safe to assume Netflix’s original content, such as Stranger Things will be accessible through even the most basic tiers.
Ultimately, the company said, the hope is “to create a better-than linear TV advertisement model that’s more seamless and relevant for consumers.”
