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Sarandos: We’re adding an advertising tier to Netflix

Co-CEO Ted Sarandos announced the company's plans at the Cannes Lions advertising festival

While speaking at the Cannes Lions advertising festival, Netflix co-CEO Ted Sarandos has announced the streamer will offer an ad-based lower cost subscription tier.

The announcement confirms what the company has been hinting at for several months since it announced a disappointing Q1 with a first ever loss of 200,000 net paid subscribers worldwide, way below its guidance forecast of 2.5 million net adds. The company reported a total of 221.64 million, up 6.5 per cent from a year earlier.

At the time, Reed Hastings, co-founder, chairman, president and co-CEO raised the idea of ad-supported plans saying, “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.

“And allowing consumers who would like to have a lower price and are advertising-tolerant get what they want makes a lot of sense. So that’s something we’re looking at now. We’re trying to figure [it] out over the next year or two. But think of us as quite open to offering even lower prices with advertising as a consumer choice.”

This was the first time Netflix had appeared at the Cannes Lions advertising festival, a clear sign that it is serious about its efforts to increase revenues by adding an ad-supported tier that also includes a campaign to crack down on password sharing.

“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,'” the Hollywood Reporter quotes Sarandos as saying. “We are 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.’”