Ads on Netflix could arrive as early as 2022

Netflix is ​​expected to introduce its lower-priced but ad-supported subscription plan by the end of the year on a faster schedule than originally stated, the company told employees in a recent note.

In the statement, Netflix executives said they intend to launch the subscription with advertising in the last quarter of this year, according to two people who shared the information, speaking on the condition of anonymity as it is an internal company business. The note also said that they intend to begin cracking down on password sharing among their subscriber base within the same period, the people said.

Last month, Netflix stunned the media industry and the advertising world when it revealed it would begin offering a lower-price subscription with ads, after years of publicly declaring it would never add advertising to its platform.

But Netflix is ​​facing significant business challenges. Announcing first-quarter earnings last month, the company said it lost 200,000 subscribers in the period — for the first time in a decade — and expects to lose another 2 million in the coming months. Since that announcement, Netflix’s stock price has dropped dramatically, wiping out about $70 billion in the company’s market capitalization.

Reed Hastings, the company’s co-chief executive, told investors that the company would look into the possibility of adopting an advertising-assisted platform and would try to “figure it out in the next year or two.”

The recent note to the team signaled that the schedule has been accelerated. “Yes, it’s fast and ambitious and will require some trade-offs,” he said. A spokeswoman for Netflix declined to comment.

Currently, Netflix offers a variety of subscription plans to access its streaming service; in the United States, the most popular costs US$ 15.49 per month (R$ 78.69). The new plan, with ads, will cost less. Other streaming services have similar plans. HBO Max, for example, offers a commercial-free service for $15 a month and charges $10 a month for the ad-supported service in the US.

Indeed, in the note to employees, the company’s executives evoked its competitors, saying that HBO and Hulu have managed to “keep strong brands while offering an ad-supported service.”

“Every major streaming company, excluding Apple, has or has announced an ad-assisted service,” the note said. “For good reason: people want lower-priced options.”

Last month, Netflix also announced that it intended to start charging higher prices to subscribers who share their account with multiple people.

“So if you have a sister, say, who lives in a different city, and you want to share Netflix with her, great,” Greg Peters, Netflix’s chief operating officer, said on the company’s earnings call. “We’re not trying to end this sharing, but we’re going to ask you to pay a little extra to be able to share with her.”

Peters said the company would go through “a year or more of iteration” on sharing passwords before implementing a plan.

In the note to employees, Netflix executives said advertising-assisted subscription on the streaming platform would be introduced “in conjunction with our broader plans to charge for sharing.”