How Would a Netflix Ad-Supported Tier Work?

Netflix might release an ad-supported plan by the end of 2022, and this is how we think it might work.

Netflix is reportedly looking to launch its ad-supported tier before the end of 2022, making this a priority following the negative reactions the company was hit with after its 2022 first-quarter report.

The company lost lots of subscribers at the start of 2022, partly due to high subscription prices and the password-sharing habit of numerous users. Launching an ad-supported tier is seen as a lifeline at this point.

Netflix May Launch an Ad-Supported Tier in 2022

The New York Times reports that Netflix executives sent employees a note in which the company expressed a desire to introduce an ad tier in the last quarter of 2022. The same note also mentions a plan to crack down on password sharing.

The company's estimates indicate that about 100 million households use Netflix without paying for it. Considering Netflix has about 222 million subscribers, that's a huge number of potential customers.

An Ad-Supported Netflix Tier: What to Expect

One thing we know about streaming platforms is that they're all checking out what the other is doing. Under these circumstances, we're going to take a quick look at how the ad-supported tier looks for Netflix competitors to figure out what the company could do.

At the time of this writing, Hulu, HBO Max, Discovery+, Peacock, and Paramount+ offer both ad-supported tiers and ad-free options.

Netflix Ad-Supported Tier: Price Point

Price has been one thing that has driven subscribers away from Netflix. The company's prices were on the rise in the US and Canada at the beginning of 2022, and they were not well-received, as its current tiers run between $9.99 and $19.99/month.

Discovery+, Peacock, and Paramount+ offer an ad-supported plan for $4.99/month; Hulu's is priced at $6.99/month, while HBO Max asks for $9.99/month. In general, the ad-supported tier is about half the price of the ad-free plan or just above that mark.

If Netflix follows the same model, the ad-supported tier could cost between $5 and $7/month.

What Perks Would an Ad-Supported Netflix Tier Give?

When it comes to the perks we're interested in, we think about how many simultaneous streams we can watch content on. Hulu allows users to watch content on two devices at once, Peacock, Paramount+, and HBO Max allow three simultaneous streams, and Discovery+ allows four.

For Netflix, this doesn't sound possible. The company's Basic plan already only allows streaming on a single device at a time, and the ad-free tier would likely allow the same.

Of course, Netflix could also completely redesign all of its subscription packages in order to allow more simultaneous streams for its Base plan and, therefore, allow simultaneous streams on one or two devices for its ad-supported tier. However, this seems unlikely since many Netflix users share their passwords already, which would probably increase the company's problem.

How Many Ads Would You See?

According to a report from MediaRadar, ad-supported tiers from Netflix competitors show between 8 and 23 ads per hour. That means that subscribers watch an average of 10 minutes of ads every hour, and Netflix is likely to adopt the same rules for its ad-supported tier.

One thing that will be interesting to see is whether Netflix will differentiate between its original and its licensed content as Hulu does. Hulu runs about seven ads per original show but 10 for licensed content. Since Netflix's library is mostly composed of original shows, the company may adopt this method too.​​​​​​​

Is An Ad-Supported Tier Enough for Netflix Subscribers?

To round things up, we believe Netflix's ad-supported plan is likely to cost between $5 and $7/month, only allow to stream on one device simultaneously, and run about 10 minutes of ads every hour. Compared to what other platforms offer, this format may not be enough to attract many new users.

With a possible launch in the last quarter of 2022, we might not have to wait too long to find out the exact format.​​​​​​​

The Netflix Ad-Supported Tier: Is That All Netflix Needs?

While it's true that Netflix might desperately need an ad-supported tier if it wants to continue boasting massive subscriber numbers, it remains to be seen whether that will be enough to earn their loyalty. With many users complaining about Netflix favoring content quantity over quality, some adjustments may be required in that department as well.