Netflix tells employees ads may come in late 2022

Netflix could introduce its lower-priced ad-supported tier by the end of the year, a more accelerated timeline than originally stated, the company told employees in a recent note.

In the note, Netflix executives said they aimed to introduce the ad level in the last three months of the year, according to two people who shared details of the communication, speaking on condition of anonymity to describe internal company discussions. The note also said they planned to start cracking down on password sharing among their subscriber base around the same time, the people said.

Last month, Netflix shocked the media industry and Madison Avenue when it revealed it would start offering a lower-priced subscription with ads, after years of publicly stating that ads would never be seen on the streaming platform.

But Netflix faces significant business challenges. Announcing first-quarter earnings last month, Netflix said it lost 200,000 subscribers in the first three months of the year, the first time that has happened in a decade, and expected to lose two million more in the coming months. Since the underwriter’s announcement, Netflix’s stock price has dropped dramatically, wiping out roughly $70 billion in the company’s market capitalization.

Reed Hastings, Netflix’s co-CEO, told investors the company would look into the possibility of introducing an ad-supported platform and try to “work it out over the next one to two years.”

The recent note to staff indicated that the timeline has been sped up.

“Yes, it is fast and ambitious and will require some concessions,” the note said.

A Netflix spokeswoman declined to comment.

Netflix currently offers a variety of paid tiers to access its streaming service; their most popular plan costs $15.49 per month. The new level with advertising will cost less. Other streaming services have similar plans. HBO Max, for example, offers an ad-free service for $15 a month and charges $10 a month for the ad-supported service.

Indeed, in the memo to employees, Netflix executives evoked their competitors, saying that HBO and Hulu have been able to “maintain strong brands while offering an ad-supported service.”

“Every major streaming company except Apple has or has announced an ad-supported service,” the note read. “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, let’s say, who lives in a different city; you want to share Netflix with her, that’s great,” said Greg Peters, Netflix’s chief operating officer, on the company’s earnings call. “We are not trying to close that exchange, but we will ask you to pay a little more from her to be able to share with her.”

Mr. Peters said the company would spend “a year or so of iteration” on password sharing before rolling out a plan.

In the note to employees, Netflix executives said the ad-supported tier for the streaming platform would be introduced “alongside our broader plans to charge for sharing.”

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