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Netflix's ad-supported tier may be coming sooner than expected

The streaming service appears to be fast-tracking its ad-supported plans, according to a note sent to employees.

An image of the red Netflix logo on a black background.

Netflix is planning to introduce an ad-supported tier.

Image: Netflix

Ad-supported Netflix is quite possibly coming sooner than expected. The streaming giant might add an ad-supported tier by the end of 2022.

During its earnings call last month, co-CEO Reed Hastings said Netflix was looking into rolling out a lower-priced, ad-supported service within the next two years. Now, it's looking to roll one out within the last three months of the year, according to a note to workers, the details of which were shared with the New York Times.

In the note, executives said the plan is "fast and ambitious" and that, like HBO and Hulu — which each offer their own ad-supported tiers — Netflix will be able to maintain a strong brand. “Every major streaming company excluding Apple has or has announced an ad-supported service,” the note said. “For good reason, people want lower-priced options.”

At the same time, the company is planning to crack down on password sharing. Netflix said it will ask people who share accounts with family members who don't live in the same households to pay a bit more. That represents a huge turn for the company, and the platform has started to test this in South America. On its April earnings call, Netflix said it could take up to a year to roll that feature out globally. (Disney+ appears to be testing out the same approach in Spain.)

The ad-supported tier comes after Netflix has suffered through some challenges to its core business over the past several months. The company lost 200,000 subscribers in the first three months of this year. Prior to the loss of subscribers, Netflix had largely rejected any thought of introducing ads to the platform. But its losses are likely to continue, which could be adding urgency to the push for the ad-supported tier; Netflix expects an estimated 2 million more subscribers could up and leave in the second quarter of this year.

The company has said part of the dip is due to pulling out of Russia following the invasion of Ukraine. But another reason Netflix expects the dip in subscribers to continue is the easing of pandemic-related restrictions around the world, meaning people are likely to spend less time on the couch binging shows and more time out in the world doing whatever it is we used to do.

Netflix shares were up more than 3% this morning.

Sarah Roach

Sarah (Sarahroach_) writes for Source Code at Protocol. She's based in Boston and can be reached at sroach@protocol.com

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