Netflix Apparently Changed Its Mind And Is Adding A Paid Tier With Ads

Netflix appears to be stepping back from its opposition to having ads, as its CEO says it will be adding a lower priced tier that includes ads. The move follows the streaming service reporting that it lost 200,000 subscribers last quarter.

The road has been a bit rough as of late for Netflix, as the company shared in a recent newsletter with its shareholders that its revenue growth had "slowed considerably." The streaming service also indicated that it expected to lose an additional 2 million subscribers in the second quarter, on top of the 200,000 it said it lost in the first quarter. Netflix has been adamant that the loss of subscribers was not due to a recent price increase, but it may be changing its tune as it seems it will be introducing a lower-cost tier to its lineup that will include ads.

The company's CEO, Ted Sarandos, spoke about the upcoming changes at the Cannes Lions advertising festival on Thursday. He confirmed that the path ahead for Netflix would introduce a paid tier that will include ads. The move is to try and reach customers that have veered away from the service due to the price, and attempt to recover some of its recent losses.

"We've left a big customer segment off the table, which is people who say: 'Hey, Netflix is too expensive for me and I don't mind advertising," stated Sarandos.

This seems to contradict what CFO Spencer Neumann said back in March at a Morgan Stanley investor conference. When asked about the potential for ads on Netflix, Neumann remarked that if the conditions were right at some point it might happen, but probably not anytime soon. It seems that the right time was actually sooner, rather than later.

Having suffered the loss of so many subscribers could bring the thought of a potential buyout in the future for Netflix. When asked about that, Sarandos admitted that it "is always a reality, so we have to be wide-eyed about that." However, he remained confident that the company could turn things around on its own. "We have plenty of scale and profitability and free cash flow to continue to grow this business." The company is scheduled to release its second quarter results on July 19, 2022.

What do you think of Netflix adding a lower cost tier that includes ads? Would you be willing to pay less for the streaming service, while having to endure ads while watching? Let us know in the comments.

Top Image Credit: Netflix