Well, it’s official. Ads are coming to Netflix. According to Netflix Co-CEO Ted Sarandos, who recently spoke at the Cannes Lions advertising festival (via Hollywood Reporter), future streaming services will see the addition of ads when they introduce an ad-supported tier that will charge customers lower fees.
“We’ve left a large segment of subscribers behind, namely the people who say: ‘hey, Netflix is too expensive for me and I don’t mind advertising,’” Sarandos said at the show of the much-discussed idea of adding ads to Netflix. “We added a tier of ads, we didn’t add ads to Netflix as you know it today. We added an ad tier for people saying ‘hey, I want a lower price and I’m going to watch the ad.’”
Historically, Netflix has rejected ads that break up a customer’s viewing experience. However, with the streaming giant facing mounting pressure amid several financial setbacks, Sarandos and Netflix’s other head honchos are clearly hopeful that adding a lower fee tier that includes advertising will help resolve some of these issues.
Netflix has faced some of its biggest difficulties since its creation in recent months, with viewership dropping and its share price slumping. Earlier this year, Netflix reported a net loss of 200,000 subscribers globally, with the expectation of losing another two million over the next few months. With this in mind, Sarandos was asked about a possible purchase. Something the Netflix Co-CEO didn’t rule out.
During an appearance at the Cannes Lions advertising festival, Sarandos admitted that the possibility of a purchase “is always a reality, so we have to be vigilant about that.” However, Sarandos hasn’t given up hope, ensuring that the streaming giant can re-grow itself. “We have a lot of scale, and profitability and free cash flow to continue to grow this business,” he added.
Netflix Can Team Up with Google to Deliver Ads
So, now that we know the tier of ad-supported Netflix is in sight, what does it look like? Recent reports from CNBC have stated that Netflix is looking into who to band together to deliver this dreaded ad, revealing that the streaming platform has been in talks with none other than Google.
“Sources told CNBC that Netflix has met with Google, which generates most of its revenue from advertising,” the report said. “It has also met with Comcast/NBCUniversal and with Roku to discuss ad sales partnerships, as previously reported by The Information. NBC Universal and Google declined to comment.”
Google is reinforcing advertising on today’s most popular video platform, YouTube, so asking Netflix for their help in delivering this new level certainly makes sense. A
Despite all these problems and setbacks, Netflix remains the most popular streaming service today with 225 million subscribers worldwide. With new streaming platforms emerging all the time, Netflix clearly needed to find a way to maintain that top spot. But is adding an ad-supported tier at a lower cost really the answer?