After recording a devastating decline in the number of subscribers over the last year, movie streaming company Netflix had to effect drastic changes to its business model. An ad-supported plan was among the top options, and the company confirmed that it’s partnering with Microsoft to make this possible.
The company recently held its Q2 earnings call and confirmed that it intends to unveil its lower-cost, ad-supported tier in early 2023.
“We’ll likely start in a handful of markets where advertising spend is significant,” the company expounded in a letter to its shareholders.
“Like most of our new initiatives, our intention is to roll it out, listen and learn, and iterate quickly to improve the offering. So, our advertising business in a few years will likely look quite different than what it looks like on day one.”
In an interview shortly after the announcement of the Q2 earnings call, CEO Ted Sarandos said that subscribers of the ad-supported tier will enjoy a large selection from its catalog, but most of it will still be exclusive to customers who pay higher.
“There are some things that won’t—that we’re in a conversation about with the studios on—but if we launched the product today, the members in the ad tier would have a great experience,”
The company said in its earnings call that global paid streaming memberships, also referred to as global paid streaming subscribers, rose by 5.5% to 220.7 million.
The changes coming to Netflix are informed by several factors including increased competition from streamers offering cheaper options and a vast catalog.