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Netflix Is Open to a Lower Price Tier -- With Ads

After upping the monthly fee for members earlier this year, the company is exploring the idea of ads.

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Netflix may add cheaper, ad-supported plans in the future.
James Martin/CNET

Amid declining subscriber numbers in the first quarter of 2022, its first subscriber drop in a decade, and a more competitive streaming landscape, Netflix is considering ad-supported price tiers. Co-CEO Reed Hastings discussed the potential change during the company's quarterly investors' earnings interview on Tuesday. 

After COO Greg Peters addressed the latest price hike for subscription plans, Hastings shared that Netflix is looking at ways to offset the cost for users. If it does make such a move, Netflix would be one of the last big streaming services to get into the ad game.

"One way to increase the price spread is advertising on low-end plans," Hastings said. He acknowledged that historically, he's been against the idea of bringing in advertisers but has since changed his perspective in favor of consumer choice.

"Allowing consumers who would like to have a lower price -- and are advertising tolerant -- get what they want, makes a lot of sense," Hastings said. "Think of us as quite open to offering even lower prices with advertising as a consumer choice."

Noting how Netflix offers film, television and gaming content, the company's goal is to bring more value to subscribers while opening the door for advertisers to reach audiences interested in their products. Rather than go through a testing phase, Hastings envisions that the company will jump into it.

"It is pretty clear that it is working for Hulu. Disney is doing it. HBO did it. I don't think we have a lot of doubt that it works," he said. "All those companies have figured it out. I'm sure we'll just get in and figure it out."

Hastings compared the proposed plans as being similar to Hulu, which gives members the option to keep their higher-priced, ad-free plans or opt for a cheaper subscription that includes commercials. One major difference would be Netflix won't engage in data tracking. 

There's no definitive timeline, but it's on the agenda to be explored -- and possibly implemented -- within the next year or two. Netflix and Apple TV Plus are among the few major streaming services that don't have commercial interruptions.