Ads are coming to a Netflix subscription plan: Here’s what we know

(NEXSTAR) — It’s official — Netflix is moving forward with adding a lower-priced, ad-supported subscription plan to its service. This comes just months after the streaming giant raised monthly subscription prices in the U.S. for all plans in order for the service to “continue to offer a wide variety of quality entertainment options.”

In a Wednesday press release, Netflix CEO and CPO Greg Peters announced they will partner with Microsoft “as our global advertising technology and sales partner.”

“It’s very early days and we have much to work through,” Peters said. “But our long term goal is clear. More choice for consumers and a premium, better-than-linear TV brand experience for advertisers. We’re excited to work with Microsoft as we bring this new service to life.”

Peters added that this lower-priced, ad-supported plan will be the company’s fourth plan, joining its basic, standard, and premium plans, all of which are ad-free. Additional details such as when the plan will be available and how much it will cost were not immediately available.

Netflix shared a note with employees in May, saying the company aimed to introduce a lower-priced, ad-supported plan during the last quarter of 2022, The New York Times reported.

It isn’t much of a surprise. During April’s earnings call, Netflix reported its first loss of subscribers in more than a decade, sending the company’s shares into a freefall.

Other services such as Hulu and Peacock offer similar plans, and Disney+ is on track to debut a similar offering later this year. Apple’s streaming service is ad-free, minus promotions for its own content.

Netflix tested commercials in 2018 – referring to them instead as video promotions that appeared between episodes and movies – but offered users the opportunity to opt out of them.

Netflix CEO Reed Hastings has never been a fan of ads, instead viewing them as a distraction from the entertainment the service provides. Hastings has also previously viewed password sharing as “something you have to learn to live with.”

While discussing quarterly earnings, Hastings said password sharing, in addition to streaming competition, is believed to be causing “lower acquisition and lower growth.” In a letter to shareholders earlier this year, Netflix executives reported that more than 100 million households are using a different household’s account.

“This is a big opportunity as these households are already watching Netflix and enjoying our service,” the letter reads. Executives also mentioned how Netflix is testing new features to monetize password sharing.

In March, Netflix said that while features like separate profiles and multiple streams available through its standard and premium plans have been “hugely popular,” they have led to “confusion about when and how Netflix can be shared.”

Two new features have been rolled out for members in Chile, Costa Rica, and Peru that will “enable members who share outside their household to do so easily and securely, while also paying a bit more.”

The Associated Press contributed to this report.