Netflix is reportedly in discussions with major studios to add an ad-based subscription tier to its service.
The Wall Street Journal reports that the major studios in discussion with Netflix include Warner Bros. (“You”), Universal Studios (“Russian Doll”), and Sony Pictures Television (“Cobra Kai” and “The Crown”). The discussions are in their early stages and no one knows if an ad-based tier will happen for Netflix. Netflix needs permission from these studios if it wants an ad-supported tier.
After a subscriber boom because of the pandemic, many streaming services, including Netflix, saw a sharp decline in subscribers. For this quarter, Netflix has projected a 2 million subscriber decline.
Many services, including Hulu and the streaming side of the cable channel Freeform, are ad-based. Amazon recently began promoting FreeVee, a free ad-supported streaming service, formerly known as IMDb TV.
More recently, Walt Disney Co.’s Disney+ announced an ad-based tier to attract subscribers set to launch later this year. On Hulu, as of a few years ago, around 70% of users use the ad-supported plans with the rest paying for pricier subscription-based plans.
Variety reported that Disney CFO Christine McCarthy cited Hulu’s ad plan subscribers as motivation for the transition.
“We actually have more [ad-supported video-on-demand] than [subscription video-on-demand] subscribers. We expect about the same percentage for both Disney+ and Hulu, just based on the experience curve that we’ve witnessed,” McCarthy said at the 9th Annual MoffettNathanson Media and Communications Summit in May.