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Netflix Reportedly Will Offer ‘Ambitious’ Ad Plan by End of 2022 After Rocky First Quarter

"Every major streaming company excluding Apple has announced an ad-supported service," a note to employees stated. "For good reason, people want lower-priced options."

IMAGE DISTRIBUTED FOR NETFLIX - A view of Netflix's Sunset Blvd. offices on Monday, July 13, 2020 in Los Angeles. (Netflix via AP Images)

Netflix Los Angeles offices

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Netflix may be introducing its lower-priced ad tier by Q4 of this year, according to a leaked notice to employees.

The New York Times reported that Netflix executives were allegedly told that an ad-supported platform will be released in the last three months of 2022. Additionally, the internal memo cited an accelerated plan to limit password-sharing among subscribers, which the streamer has already addressed with a test $2.99 sharing fee program in Chile, Costa Rica, and Peru.

“Yes, it’s fast and ambitious and it will require some trade-offs,” the Netflix memo read, as reported by the Times. “Every major streaming company excluding Apple has or has announced an ad-supported service. For good reason, people want lower-priced options.”

Netflix co-CEO Reed Hastings previously told investors during the Q1 earnings report that the possibility of introducing an advertising-supported platform will be figured out “over the next year or two.”

Now, that timeline has substantially shifted.

“Those that have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription,” Hastings stated during the April 19 earnings call. “But as much as I’m a fan of that, I’m a bigger fan of consumer choice. And allowing consumers who would like to have a lower price and are advertising-tolerant, get what they want, makes a lot of sense.”

In the internal memo released on May 10, Netflix allegedly cited the success of HBO Max and Hulu, which both offer ad-supported services while being able to “maintain strong brands.”

Netflix currently offers multiple plans on different payment tiers. Its most popular plan costs $15.49 per month; the ad-supported option will cost less. The streamer revealed it had actually lost 200,000 global paid subscribers in the first quarter of 2022, leading to approximately $70 billion in the company’s market capitalization tanking as share prices severely plummeted.

The streamer was later at the center of a shareholder lawsuit claiming the platform misled investors about subscriber loss over the last six months, culminating in the stock price dip. The lawsuit, filed on May 3, names Netflix co-CEOs Hastings and Ted Sarandos and CFO Spencer Neumann as defendants. It seeks damages for investors who traded Netflix shares between Oct. 19, 2021, and April 19, 2022.

The suit alleges Netflix violated U.S. securities laws by making “materially false and/or misleading statements” and failing to “disclose material adverse facts about the company’s business, operations, and prospects.” The lawsuit seeks class-action status and unspecified monetary damages on behalf of investors.

Netflix has not publicly commented on the lawsuit as of print.

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