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Netflix Considered Making Its Ad Tier the ‘Default,’ but Opted to Honor ‘Long History of Not Having Ads’

At one point, Netflix considered making its ad tier the default option before opting not to go in that direction.

The company addressed its strategy in response to a question asked about Netflix’s positioning versus Amazon Prime Video during the company’s fourth quarter earnings call for 2023. When it’s released later this year, Amazon’s ad tier will serve as the default for subscribers.

“Given our long history of not having ads, we thought it was better for our members, rather than force them into a change and give them ads, it was better to attract them to the ads plan,” co-CEO Greg Peters explained during the call on Tuesday.

Currently, Netflix offers three pricing tiers: Standard with ads, Standard and Premium. Standard with ads — the option Peters emphasized has a “lower price point” — costs $6.99 at present and includes two supported devices at a time, full HD and the ability to download content on two different devices. However, not every show and movie available on Netflix is included in this option.

The Standard plan, which costs $15.49 a month, includes all of the benefits of the ad plan as well as access to all Netflix titles and the ability to add up to one paid extra member for a user who doesn’t live in your household. The Premium tier, which costs $22.99 a month, offers Netflix’s full library, ultra HD, the ability to watch on four devices at a time, the ability to download titles on six supported devices and the option to add up to two extra members.

Peters went on to say that the current offerings, including the ad tier, seem to be “generally” working out for Netflix’s subscribers. “We haven’t seen any big backlash,” Peters noted.

Repeatedly throughout the call, Netflix emphasized that there is over $25 billion in connected television ad spending alone and that the company is well placed to capture some of that.

“We know ad dollars follow engagement,” Peters said. “I really think we need to play to our strengths. We’ve got an incredibly engaged audience— the most engaged audience — who is watching the most culturally defining films, series and live events. That is an important place for brands to be, and it’s something that differentiates us from our competitors.”

Netflix’s ad-supported subscriber tier first launched in November 2022. A year later, the option grew to include 15 million subscribers globally. That total reached 23 million subscribers globally, president of advertising Amy Reinhard said at the Variety Entertainment Summit at CES 2024.

As for how Amazon’s ad offering will perform, that remains to be seen. Beginning on Jan. 29, Prime Video will include “limited advertisements” on its movies and TV. Subscribers will be able to remove these ads by paying an additional $2.99 per month. Live events, which include sports, as well as content offered through Amazon Freevee will continue to include advertising.

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