A cheaper, ad-supported version of Netflix won’t have the streaming service’s full content library due to licensing agreements with third party providers of shows and movies, a company executive affirmed on a conference call this week.
Speaking with investors and reporters after Netflix released their quarterly earnings report, the company’s co-chief executive Ted Sarando said the service is still negotiating with some licensors over certain content that currently appears in the streamer’s library of shows and movies, but that the cheaper tier is likely to launch without the full portfolio of content that is currently available to subscribers.
“Today, the vast majority of what people watch on Netflix, we can include in the ad-supported tier,” Sarando said, noting that the streamer may not be able to reach agreements with all of its licensors over every piece of content before the ad-supported tier becomes available.
“We will clear some additional content, but certainly not all of it, but we don’t think it’s a material hold back to the business,” Sarandos affirmed.
Netflix confirmed plans to launch a cheaper tier supported by advertisements earlier this year after the company revealed in April that it had lost more subscribers than it gained for the first time since it went public. In the three months ending March 30, Netflix revealed its global paying subscriber count had dropped by 200,000, something it attributed to password-sharing and challenges faced by upstart — and, sometimes, cheaper — streaming services.
That loss grew to over 970,000 subscribers in the three-months ending June 30, Netflix revealed on Tuesday, but the company still has over 220 million global paying subscribers, and it believes it could reverse that loss in the coming months.
A cheaper, ad-supported version of Netflix is likely to help reverse that trend. Companies like Warner Bros Discovery, Comcast and Paramount Global have seen significant subscriber growth by offering streaming customers a choice between a premium, ad-free version of their service or a cheaper, but still robust, version that is subsidized by occasional ad interruptions.
No service has seen more success with this model than the Walt Disney Company’s Hulu, which counts over 40 million subscribers in the United States, many of whom opt to pay $6 a month to access hundreds of movies and TV shows that include brief advertisements. (An ultra-premium version of Hulu that costs $70 a month and includes live TV feeds from dozens of pay TV networks has around 4 million subscribers; Hulu’s video on-demand library is included with that service, with content subsidized by advertisements.)
Netflix recently tapped Microsoft to serve as its global technology and sales partner for its ad-supported service, which will likely launch early next year. Less clear is how much Netflix will charge customers to access Netflix with ads. A current subscription to Netflix costs $10 a month to access standard-definition video from one screen, or $15.50 a month for two simultaneous streams of high-definition content. An ultra-premium subscription offers better video resolution and four simultaneous streams for $20 a month.
