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Netflix CEO Confirms Ad-Supported Tier Coming, Explains Why

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Netflix Co-CEO Ted Sarandos on Thursday confirmed advertisements are coming to the streaming platform (via The Hollywood Reporter).

Speaking at the Cannes Lions advertising festival, Sarandos explained Netflix’s previously announced decision to introduce cheaper, ad-supported subscription plans.

Netflix has historically been against advertising. Sarandos essentially clarified that the streaming giant is not bringing ads to its service, but rather bringing a cheaper, ad-supported subscription plan to users who want it to maximize its reach.

“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,'” Sarandos told Sway podcast host Kara Swisher at the festival. This is the first time Netflix has attended Cannes Lions, which has been named Sarandos “Entertainment Person of the Year” for this year.

“We adding an ad tier; we’re not adding ads to Netflix as you know it today. We’re adding an ad tier for folks who say, ‘Hey, I want a lower price and I’ll watch ads.'”

Netflix’s plans to launch a cheaper, ad-supported subscription tier are also economically-motivated.

Since the start of this year, Netflix has lost more than 65% of its market value on the heels of slowing subscriber growth and a net loss of 200,000 subscribers during the first quarter (its first quarterly subscriber loss in over 10 years). The streamer has definitely seen better days.

Netflix has been scrambling to get back on the front foot, and making a play to grow subscriptions and boost revenue is one way to get there. There have even been rumours of Netflix acquiring Roku, which boasts established video-advertising operations that generated $647 million in Q1 2022.

During his appearance, Sarandos said Netflix itself facing a buyout “is always a reality.” However, the CEO believes Netflix can return to form on its own.

“We have plenty of scale and profitability and free cash flow to continue to grow this business,” he noted. He added that streaming still only accounts for “about 10 percent of what people do on TV.” As such, Sarandos argued there was still “a lot of room to grow” for Netflix.

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