Netflix to introduce ad-supported tier by year end

At the tail end of last month, Netflix announced slowing revenue growth as well as its first subscriber drop in over a decade.

To get the company back on track and keep shareholders happy, Netflix had already started considering cracking down on password sharing or making people who share passwords pay a higher subscription fee.

This was a complete U-turn from their earlier advertising days when they pushed the slogan “sharing is caring” in relation to sharing your Netflix passwords with your friends and family.

“We’ve always made it easy for people who live together to share their Netflix account, with features like separate profiles and multiple streams in our Standard and Premium plans…While these have been hugely popular, they have also created some confusion about when and how Netflix can be shared. As a result, accounts are being shared between households — impacting our ability to invest in great new TV and films for our members,” Netflix said in a blog post.

The crackdown on password sharing when users are not in the same household has already begun in some countries, and it is only a matter of time before they make the policy global.

“So if you’ve got a sister, let’s say, that’s living in a different city; you want to share Netflix with her, that’s great, We’re not trying to shut down that sharing, but we’re going to ask you to pay a bit more to be able to share with her,” explains Greg Peters, Netflix’s Chief Operating Officer

Another avenue the company was considering in boosting their declining revenue was introducing a less expensive streaming tier that will be supplemented by ads.

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This option was thought to be some way out in the future, but a new report from The New York Times explains that Netflix will be introducing the ad-supported tier sometime in the last quarter of 2022.

Netflix recognizes that its competitors including Hulu and Disney already have, or have announced plans to introduce a lower-priced tier that is supplemented by ads making those platforms more attractive to users who do not have a large disposable income to pay for an ad-free experience.

“Yes, it’s fast and ambitious, and it will require some trade-offs. Every major streaming company excluding Apple has or has announced an ad-supported service. For good reason, people want lower-priced options,” Netflix’s press note said.

In terms of what the company considers factors that are hampering Netflix’s growth, the company recognizes growing competition from the likes of Disney, Paramount, and Warner Bros. In addition, Netflix mentions the slowdown might be an indication of saturation in its major markets.

This might explain the aggressive way the company has gone about trying to increase its reach in emerging markets like Kenya where we had a free mobile tier with limited content as well as India where they have monthly plans starting as low as $2.6(Ksh 300)

Whether these aggressive moves will prove successful is a matter of waiting and seeing, but personally, I think a lower-priced tier supplemented by ads will prove popular in emerging markets as people are already used to dealing with ads in other popular apps including Facebook, TikTok, and YouTube.

Naftaly is a Computer Science graduate with a passion for tech, video games and pop culture. When he is not writing articles for AndroidKenya, he is probably rewatching the Lord of the Rings trilogy for the hundredth time. Email at Twitter @KarisNaftaly

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