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Never Say Never: Netflix to Explore Lower-Priced Ad-Supported Streaming Tier

Netflix's Los Angeles headquarters
(Image credit: Netflix)

Netflix Co-CEO Reed Hastings has long resisted the notion that Netflix might deviate from its subscription-only dogma and offer a lower-priced tier that is at least partly subsidized by advanced advertising. 

But coming off its first quarterly subscriber loss since its Qwikster debacle back in 2011, Netflix has suddenly reversed its course on ads. 

"Those that have followed Netflix know that I’ve been against the complexity of advertising and that I'm a big fan of the simplicity of subscription,” Hastings said during his quarterly interview for shareholders. “But as much as I’m a fan of that, I’m a bigger fan of consumer choice. And allowing consumers who would like to have a lower price and are advertising-tolerant get what they want, makes a lot of sense.”

Netflix is aiming to establish its ad-supported strategy over the next year or two, Hastings said. 

Also: Netflix Plan For A Tier With Commercials A Positive Sign for Ad Tech: Analyst 

Hulu has long offered a $6.99 base tier partially supported by ads. 

Rival HBO Max, which prices its full subscription service at $14.99 a month, adopted a partially ad-supported tier last year priced at $9.99 monthly.

Disney is in the process of developing an ad-supported strategy for Disney Plus. And NBCUniversal's Peacock established a free, entirely ad-supported tier at launch two years ago. In fact, that remains the most popular iteration of Peacock. 

“I don’t think we have a lot of doubt that [advertising based streaming] works,” Hastings said. “I’m sure we’ll just get in and figure it out — as opposed to test it and maybe do it or not do it.”

Netflix, which saw its stock price fall over 25% in after-hours trading Tuesday, currently prices its most popular tier in the U.S. and Canada at $15.49 a month after a January price increase. 

Daniel Frankel is the managing editor of Next TV, an internet publishing vertical focused on the business of video streaming. A Los Angeles-based writer and editor who has covered the media and technology industries for more than two decades, Daniel has worked on staff for publications including E! Online, Electronic Media, Mediaweek, Variety, paidContent and GigaOm. You can start living a healthier life with greater wealth and prosperity by following Daniel on Twitter today!