Netflix is looking to introduce advertisements on its platform and will begin cracking down on password sharing before the end of 2022, a new report has claimed, citing access to an internal note. That's much quicker than what Netflix founder and co-CEO Reed Hastings had put out just a month ago on the most recent quarterly earnings call. Back then, Hastings had said that the world's biggest subscription-based video streaming service would chart out ad-driven alternatives to the existing plans over the “next year or two.” And on that same call, Netflix's COO Greg Peters had said that Netflix would “through a year or so of iterating” on password sharing before it rolled out a plan. But it might happen sooner now.
Two individuals who had access to the internal Netflix note shared it with The New York Times, which reveals that Netflix executives are aiming to launch the ad-supported tier between October and December 2022. It's unclear at this point how Netflix's foray into advertisements will work, since it's one of the only ones internationally — between Disney+, HBO Max, Amazon Prime Video, Apple TV+, Hulu, Peacock, and Paramount+ — to offer multiple plans that differentiate across video quality and number of simultaneous screens, and not content. Will there be an ad-supported version of Netflix's Mobile, Basic, Standard, and Premium plans? That seems likely, as it'd allow Netflix to target customers widely.
In the note accessed by NYT, Netflix executives noted how their American competitors have been able to “maintain strong brands while offering an ad-supported service.” Hulu, Peacock, Paramount+, and HBO Max all offer ad-supported tiers in the US at a lower cost than commercial-free plans. Disney+ is set to introduce its own ad-driven tier in late 2022. In India, Disney+ Hotstar, Voot, Zee5, Eros Now, and SonyLIV already have ad-supported tiers. Netflix acknowledged the US situation in its note: “Every major streaming company excluding Apple has or has announced an ad-supported service. For good reason, people want lower-priced options.”
Netflix's plans to crack down on password sharing will also begin around the last three months of 2022, the internal note accessed by NYT said. Peters has already revealed that they are not “trying to shut down [password] sharing, but we're going to ask you to pay a bit more to be able to share.” For those wondering how this might work, Netflix has been testing the option for subscribers to pay to share their accounts outside their household in Chile, Costa Rica, and Peru since March. This allows Netflix members to add “sub accounts” for up to two individuals who don't live with them, at a lower price. Alongside, Netflix also introduced profile transfers in those regions, letting those who were mooching take their watchlist, viewing history, and personalised recommendations to a new account or profile.
Fast-tracking both — ad-supported plans, and password sharing crackdown — hints at Netflix's desperation to turn the ship around. In April, the streaming service reported its first loss of subscribers in a decade, which deeply impacted its stock price and in turn valuation, and the perception of the video streaming industry as a whole. On its latest quarterly earnings call, Netflix said it estimates there are more than 100 million households that use its offerings but don't pay for it. As of March end, Netflix had over 221.6 million subscribers, though it expects to lose 2 million more by the end of this quarter. With the sooner-than-expected rollout of lower priced tiers and the ability to add more accounts to existing profiles, Netflix will hope it can add millions more in 2023.
“Yes, it's fast and ambitious and it will require some trade-offs,” Netflix executives said in the note. But will it be enough?