After years of resisting ads on his streaming service, Netflix it is now “open” to offering lower price levels with ads, co-CEO Reed Hastings said Tuesday.
Hastings has long opposed adding commercials or other promotions to the platform, but said during the company’s pre-recorded earnings conference call that “it makes a lot of sense” to offer customers a cheaper option.
“Those who have followed Netflix know that I have been against the complexity of advertising and I am a big fan of the simplicity of subscription,” Hastings said. “But as much of a fan of that as I am, I’m a bigger fan of consumer choice, and allowing consumers who would like to have a lower price and tolerate advertising to get what they want makes a lot of sense.”
In this photo illustration the Netflix logo is seen in the App Store on a smartphone screen.
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The option likely won’t be available on the service for a year or two, Hastings said. A new level with advertising has plenty of profit potential for Netflix, which on Tuesday reported its first loss of subscribers in over a decade.
Netflix cited increasing competition from recent streaming launches by traditional entertainment companies, as well as rampant password sharing, inflation and the ongoing Russian invasion of Ukraine for the recent stagnation in paid subscriptions.
In an effort to attract more subscribers, Netflix has increased its spending on content, particularly originals. To pay for it, the company raised the prices of its service. Netflix said those price changes are helping to boost revenue but were partially responsible for the loss of 600,000 subscribers in the United States and Canada during the most recent quarter.
A lower-tier option that includes ads could keep some price-conscious consumers on the service and provide Netflix with a different avenue for funding.
“It’s pretty clear it’s working for Hulu. Disney is doing it. HBO did it,” Hastings said. “I don’t think we have much doubt that it works.”