Netflix may introduce its less expensive ad-supported level by the end of the year, a more accelerated timeline than originally indicated, the company told employees in a recent note.
In the note, Netflix executives said they aimed to introduce the ad level in the last three months of the year, according to two people who shared details about the communication, and spoke on condition of anonymity to describe internal discussions in the company. The memo also said that they planned to start cracking down on password sharing among the subscriber base at about the same time, the people said.
Last month, Netflix overwhelmed the media industry and Madison Avenue when it revealed that they would start offering a cheaper subscription to ads, after years of public statements that commercials would never be seen on the streaming platform.
But Netflix faces significant business challenges. In announcing the results for the first quarter last month, Netflix said it lost 200,000 subscribers during the first three months of the year – the first time in a decade – and expected to lose another two million in the coming months. Since the subscriber announcement, Netflix’s stock price has fallen sharply, wiping away about $ 70 billion in the company’s market value.
Reed Hastings, Netflix’s CEO, told investors that the company would explore the possibility of introducing an advertising-backed platform and that it would try to “find out over the next few years or two.”
The recent message to employees signaled that the timeline has increased.
“Yes, it is fast and ambitious and it will require some deliberation,” the memo said.
A spokeswoman for Netflix declined to comment.
Netflix currently offers a variety of payment levels to access the streaming service; the most popular plan costs $ 15.49 a month. The new ad-supported level will cost less. Other power services have similar plans. HBO Max, for example, offers a commercial free service for $ 15 a month, and charges $ 10 a month for the advertising service.
In fact, in the note to employees, Netflix executives outdid their competitors, saying that HBO and Hulu have been able to “maintain strong brands while offering an ad-supported service.”
“All major power companies except Apple have or have advertised an ad-supported service,” the memo said. “For good reason, people want cheaper alternatives.”
Last month, Netflix also announced that it intends to start charging higher rates to subscribers who share their account with multiple people.
“So if you have a sister, let’s say, it’s living in another city; you want to share Netflix with her, that’s great, ”said Greg Peters, Netflix’s chief operating officer, at the company’s earnings call. “We are not trying to close that sharing, but we will ask you to pay a little more to be able to share with her.”
Mr. Peters said the company would go “through a year of iteration” on password sharing before rolling out a plan.
In the note to employees, Netflix executives said that the advertising-supported level of the streaming platform would be introduced “in line with our broader plans to charge for sharing.”