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It's official — Netflix is getting a cheaper tier with ads

Man watching Netflix on TV
(Image credit: Shutterstock)

Earlier this year, Netflix suggested that ads could come to the service as part of a cheaper subscription tier. Now it’s been confirmed that this will definitely happen (via The Hollywood Reporter (opens in new tab)).

Netflix Co-CEO Ted Sarandos shared the news at the Cannes Lions advertising festival earlier today (Thursday, June 23). Speaking on stage with Sway podcast host Kara Swisher, Sarandos revealed that advertising will play a part in the future of Netflix.

“We’ve left a big customer segment off the table,” Sarandos said, “which is people who say: ‘Hey, Netflix is too expensive for me and I don’t mind advertising.'" 

So, as with other streaming services such as Hulu, Peacock and (eventually) Disney Plus, you'll be able to choose whether you want a lower monthly price or an ad-free experience.

We first heard about this possibility back in March, with Netflix CFO Spencer Neumann admitting that the company would "never say never" to an ad-supported tier. However, Neumann also claimed that it wasn't something Netflix was considering at the time. How quickly things can change, huh?

Co-CEO Reed Hastings later said he was open to the idea of adding ads to Netflix at the end of April, and by mid-May he admitted it was a "viable way" to bring in new subscribers. Hastings also emphasized the fact that consumers should have the choice to either enjoy an ad-free viewing experience or to subsidize their cheaper subscription with commercials

Today, Sarandos was quick to reiterate the fact that ads will only be coming to this new, cheaper tier. “We’re adding an ad-tier, we’re not adding ads to Netflix as you know it today. We’re adding an ad tier for folks who say ‘Hey, I want a lower price and I’ll watch ads.'”

Those of you who already subscribe to Netflix shouldn’t be seeing any change when the new tier launches, then. This is hardly a surprise: if Netflix attempted to force ads on existing subscribers it would likely prove disastrous, destroying any of the good will Netflix has left.

After all, Netflix has been making some unpopular decisions lately, from even more price increases, to the seemingly never-ending waves of cancellations, to losing its content to rival services and the recent moves to crack down on password sharing. It's no surprise that subscribers have been jumping ship.

Forcing ads onto an existing subscription tier would only serve to drive more people away. Especially if Netflix implemented those ads as haphazardly as it has been cracking down on password sharing

On the latter front, the streamer is currently testing a new system in Peru, Chile and Costa Rica, which prompts people to pay an extra $3 a month to share accounts with others outside their household.

Unfortunately, Peru’s consumer rights agency, Indecopi, reportedly thinks the policies are confusing, and potentially discriminatory. What’s more, the prompts are said to be having the opposite of the intended effect, with people canceling their subscriptions rather than pay the extra.

Unfortunately, Sarandos didn’t offer any additional details about the advertising tier, so we don’t know when it will arrive or how much it will cost. But rest assured that we'll bring you more information on Netflix's incoming ad-supported subscription tier as and when we hear it.

Tom is the Tom's Guide's Automotive Editor, which means he can usually be found knee deep in stats the latest and best electric cars, or checking out some sort of driving gadget. It's long way from his days as editor of Gizmodo UK, when pretty much everything was on the table. He’s usually found trying to squeeze another giant Lego set onto the shelf, draining very large cups of coffee, or complaining that Ikea won’t let him buy the stuff he really needs online.