Coming soon to your Netflix account: ads.
During its quarterly earnings report, where it revealed its first drop in global subscribers in a decade, Netflix said it is exploring plans that include ads for a lower price.
In a call with investors, Netflix co-founder and CEO Reed Hastings said he has been against “the complexity of advertising,” preferring the simplicity of a subscription.
“But as much I’m a fan of that, I’m a bigger fan of consumer choice,” Hastings said. “And allowing consumers who would like to have a lower price and are advertising-tolerant (to) get what they want makes a lot of sense.”
Although Hastings said an ad-supported plan is still a year or two away, it’s a moment Netflix subscribers might potentially dread. One of the biggest appeals of Netflix is watching their favorite TV shows or movies without a single commercial interruption.
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However, more consumers appear comfortable mixing ads with their streaming, so long as it’s affordable. A December survey from Forrester found 44% of US online adults who use a streaming service will put up with ads if it means they pay less.
“Ultimately consumers will follow the content and the overall value they’re getting when choosing which streaming services make their watch list,” said Forrester VP and Research Director Mike Proulx.
Complicating matters is Netflix is also trying to crack down on subscribers who share their passwords. The company said it plans to expand features over the next year that it’s testing in Chile, Costa Rica and Perugiving users the option to pay extra if they want to share their account outside their household.
How will my Netflix subscription change?
Netflix did not reveal details on what plans would look like once an ad-supported option is available, or how much it might cost.
But other services might provide a glimpse at how new Netflix plans could function. Hulu, for example, has long offered both ad-backed and ad-free plans.
Hulu has a $6.99-a-month plan with ads and a $12.99-per-month option without the ads.
HBO Max offers similar plans, with a $9.99-per-month subscription with ads, and one for $14.99 that strips ad but supports features like offline downloads. Fellow streaming service Peacock provides ad-free and ad-supported subscriptions, too.
Last month, Disney announced it would introduce an ad-supported version of Disney+ later this year but didn’t provide information on prices.
Currently, Netflix offers three plans: a basic plan for $9.99, a standard plan – its most popular – to $15.49, and a premium plan for $19.99. The big question for Netflix is how much an ad-backed subscription will cost, said Wedbush analyst Michael Pachter.
“You look at Hulu. It’s $12.99, they cut the price (for the option with ads) to $6.99, so they cut it by $6. If Netflix says, oh, we’ll cut it to $9.49, I doubt anybody does it,” said Pachter. “It’s like what’s the point? You’re still paying more for Netflix with ads than you’re paying for Disney without, which doesn’t make sense at all.”
Would you be open to ads on Netflix if you could pay less? Tell Brett Molina on Twitter: @brettmolina23.