Netflix has confirmed that an ad-supported subscription category is coming, breaking one of the last core principles by which the company operates.
Speaking at the Cannes Lions, co-CEO Ted Sarandos said the tier will give viewers the opportunity to subscribe to Netflix at a lower price, but the comments come just months after the CFO told investor conferences “Never say never, but it’s not in our plans.”
In an interview with Kara Swisher for the Sway podcast (via The Hollywood Reporter), Sarandos said it could help Netflix reach new people. Most likely, it will be a way to bring back subscribers who have missed a period of time, who have been priced out of Netflix by constant price increases, and who now have more options to spend their streaming budget.
Anyway, Sarandos said, “We’ve left a huge cross-section of customers off the table, which are the people who say, ‘Hey, Netflix is too expensive for me and I don’t mind advertising.
“We’re adding an ad layer; we’re not adding ads to Netflix as you know it today. We’re adding an ad category for people who say, ‘Hey, I want a lower price and I’ll watch ads.'”
Price and how many ads?
It remains to be seen what this low price will reach, as well as how many ads viewers will have to contend with when subscribing to the ad funded tier.
If Netflix can keep it in pre-roll ads, that might be more palatable to some viewers. However, if Netflix is fully operational and has ads before and during episodes, such as TV and Hulu with ads with 3-4 minute commercial breaks, it would really go against one of the company’s core tenets.
Reports earlier this week indicated that Netflix is in talks with Google about running its advertising business. Google is, of course, the biggest seller of online video ads through YouTube, so a short-form pre-roll that might be one we’ll see eventually.
The bids come to squeeze at the same time that Netflix confirmed another round of 300 layoffs.