Netflix plans to roll out cheaper plans, supported by ads.
Netflix co-CEO Reed Hastings revealed the move on the company’s quarterly earnings call Tuesday, adding that the company will explore what those plans will look like “over the next two years.” Netflix COO Greg Peters said advertising is “a great opportunity for us”.
“Those who have followed Netflix know that I have been against the complexity of advertising and a big fan of the simplicity of subscriptions,” Hastings said. “But as much as I’m a fan of that, I’m a bigger fan of consumer choice. And letting consumers who want a lower price and who are ad tolerant get what they want makes sense.”
Hastings said the embrace by competitors played a part in changing the company’s mind.
“It’s pretty clear that it works for Hulu, Disney does it, HBO did it. We have no doubts that it will work,” Hastings said, adding that it will be a plan layer similar to Hulu.
Hastings also said that when Netflix launches an ad-supported tier, it would do so as a publisher, without the data tracking and ad-matching that some competitors are embracing.
“In terms of earning potential, the online advertising market has certainly progressed, and now you don’t have to include all the information about people that you used to,” Hastings said. “We can stay out of that and really focus on our members, creating that great experience.”
The move to embrace advertising marks a sea change for Netflix, which has resisted advertising on its service since its inception. But with subscriber growth slowing and now declining, the potential to bring new, more price-sensitive users into the ecosystem is proving too great to ignore.
The decision also confirms the advertising industry’s investment in streaming, with many top marketers pushing for the streaming giant to let them advertise in the service.