Back in the fall of 2019, in a conversation with me, Netflix co-founder Marc Randolph swatted away the likelihood that the streaming giant would ever allow ads on the platform. That’s in spite of analyst speculation at the time showing that the company could grab a windfall of as much as $1 billion if it ever decides to flip that switch and allow Netflix ads. “These things which seem like low-hanging fruit never are,” Randolph told me. “Ads are a distraction, never an additive thing.”
That was less than two years ago, but it might as well have been eons before now. Back in the pre-Covid era, when everything was still normal and there was no such thing as HBO Max, Disney Plus, or Apple TV Plus. Citing headwinds today, though, that range from tons of password-sharing among subscribers to a glut of more-than-capable streaming rivals, Netflix on Tuesday, April 19, presented a brutal quarterly earnings picture. So what’s that got to do with ads, you might ask?
Netflix ads might be coming, Reed Hastings confirms
Among other things, the streamer on Tuesday also said it lost subscribers for the first time in more than a decade. Billions of dollars vanished from Netflix’s market cap in the wake of the earnings announcement.
With all that in the background, this is the moment when Netflix co-CEO Reed Hastings decided to confirm one of those “huge, if true” rumors about the company that’s been swirling for months.
Yes, Hastings acknowledged during the streamer’s first-quarter earnings interview, Netflix is considering the launch of ad-supported subscription tiers. Potentially removing one of the signature features of the Netflix customer experience, apart from the binge model. Though even the latter is no longer universally applied either, thanks to the weekly rollout of some shows.
“One way to increase the price spread is advertising on low-end plans and to have lower prices with advertising,” Hastings said.
Don’t worry, though: It’ll be at least another year or two, at a minimum, before the first Netflix ads appear.
“I’ve been against the complexity of advertising”
Hastings continued. “Those who have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription. But as much as I’m a fan of that, I’m a bigger fan of consumer choice.
“Allowing consumers who would like to have a lower price and are advertising-tolerant to get what they want makes a lot of sense. So, that’s something we’re looking at now, we’re trying to figure out over the next year or two.”
To be sure, there’s a slew of Netflix hot takes out today. They encompass everything from Netflix’s subscriber losses to the possibility of ads. Plus the recent price increase. Not to mention whether some of this might just be attributable to Netflix needing to make better original content.
Also worth noting is the fact that just a month ago? The streamer’s CFO Spencer Neumann said at an industry conference that Netflix ads weren’t in the company’s plans at the moment. Life comes at you fast, apparently?
“It’s not like we have religion against advertising, to be clear,” Neumann said. Netflix ads might be in the cards down the line, eventually, he continued. But “that’s not something that’s in our plans right now. We have a great model in the subscription business, it scales globally.”
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