Netflix is reportedly planning to crack down on account sharing, and ads could be coming to Netflix sooner than expected. The company told employees in a note that a lower-priced, ad-supported tier might roll out by the end of this year. That note was obtained by The New York Times.
These moves come on the heels of last month’s stunning news that Netflix lost subscribers for the first time in more than a decade. The company expects to lose 2 million more next quarter. The poor showing led to a steep nosedive in share price or about a $70 billion loss in market capitalization.
After years of dismissing the idea of ads on Netflix, co-CEO Reed Hastings acknowledged it was a viable option to attract new subscribers.
“Those who have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription,” he told investors. “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.”
Still, an ad-supported tier seemed a ways off, as Hastings said the company would “figure it out over the next year or two.” But it seems the timeline has been greatly accelerated.
“Yes, it’s fast and ambitious and it will require some trade-offs,” the note reportedly says.
The password sharing crackdown is coming
Netflix account sharing is almost ubiquitous (thanks, Mom!), and the company has generally turned a blind eye. However, after the dismal earnings report, Netflix indicated an intention to crack down on the practice. While they won’t completely prohibit it, they will charge you more for it.
“So if you’ve got a sister, let’s say, that’s living in a different city; you want to share Netflix with her, that’s great,” Greg Peters, Netflix’s chief operating officer, told investors. “We’re not trying to shut down that sharing but we’re going to ask you to pay a bit more to be able to share with her.”
In March, Netflix began started testing an extra fee for account sharing in Peru, Chile and Costa Rica in March. It will roll out to other regions later this year, too, as the note said the ad-supported tier will launch “in tandem with our broader plans to charge for sharing.”
How much will Netflix with ads cost?
Offering a cheaper, ad-supported option may be necessary to compete in today’s streaming landscape. As Netflix’s note points out, “Every major streaming company excluding Apple has or has announced an ad-supported service. For good reason, people want lower-priced options.”
An ad-supported Disney Plus plan is rolling out in the U.S. later this year. HBO Max already offers an AVOD plan, which costs $10 per month compared to the ad-free $15 tier. Peacock and Paramount also have $5 ad-supported plans (and Peacock has a free level).
Currently, Netflix offers three plans: a basic non-HD Basic plan for $9.99; the most popular Standard plan, which comes with HD streaming for $15.49; and the $19.99 Premium plan, which offers 4K Ultra HD.
An ad-supported tier with HD streaming could cost the same as the Basic plan (or replaced it entirely). That would put it on par with HBO Max, though likely more than whatever Disney Plus’ ad plan will cost.
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