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Netflix CEO Reveals Which Subscribers Will Have To Watch Ads

Coming out of a couple of booming years in the heart of the COVID-19 pandemic, 2022 has been a year of big change for Netflix, the once dominant streaming service provider in the entertainment industry. Already embattled over controversies including protests over its content — including trans activists holding the company's feet to the fire over Dave Chappelle's comedy specials — the corporation's stock price took a major hit with the revelation in April that the service lost 200,000 subscribers in the first quarter of 2022 (via The Hollywood Reporter).

Boosted by the success of "Squid Game," Netflix hit a record stock price of nearly $700 per share in November 2021. However, this number dropped 35% after the streamer released its Q1 earnings report (via CNBC). As of June 23, Netflix's price per share has tumbled even further, opening the day at $180 per share (via MarketWatch).

Of course, what's separated Netflix from most streaming services is that it has presented its programming entirely ad free. Instead, the platform has solely relied on customer subscriptions for its revenue. Obviously in need of an infusion of cash, Netflix announced in May that it was working on plans to implement an ad-based option. The move was reportedly made to help combat lost revenues due to user password sharing and a looming Q2 forecast that predicts the loss of another 2 million subscribers (via New York Times).

Specific details of the forthcoming ad-based model were murky at the time of the announcement. Only a few months later, Netflix Co-CEO Ted Sarandos is finally giving the public a little more clarity on what to expect.

Sarandos says ads will be part of a new tier

According to The Hollywood Reporter, Netflix Co-CEO Ted Sarandos participated in a Q&A with "Sway" podcast host and New York Magazine Editor-at-large Kara Swisher at the Cannes Lions advertising festival in France on Thursday. During the discussion, Sarandos divulged that commercials will not be added to the current Netflix subscription plans. Instead, the new ad-based tier is intended to attract new subscribers who are not bothered by advertisements accompanying the content they're watching.

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

The clarification should come as good news to current Netflix subscribers, who are currently paying either $9.99, $15.99, or $19.99 per month for the service. The prices are determined by such factors as the number of screens a subscriber chooses to watch programming on, and whether they want to watch the content on HD or Ultra HD.

Netflix Co-CEO Reed Hastings expressed confidence in April (via Variety) that Netflix's upcoming ad-based model will not hurt the Netflix brand. He noted that the option of ad-free or ad-based offerings have worked for streaming competitors including Hulu and HBO Max, and the company will "just get in and figure it out — as opposed to test it and maybe do it or not do it."

Of course, Netflix isn't the only streaming service with plans to add an ad-based tier. Disney+ — where subscribers currently pay $7.99 per month with no commercials — also has a cheaper ad-based model in the works. The New York Times reported that the new Netflix ad-model is expected to be implemented in Q4 2022.