Netflix co-CEO Ted Sarandos confirmed that the company plans to offer an ad-supported subscription for the streaming service in an interview at the Cannes Lions Advertising Festival .

The New York Times reported last month that the company aims to roll out the new subscription by the end of 2022. Sarandos said: “We have excluded a large segment of customers who say the subscription is too expensive for them and do not mind the presence of ads. We are adding an ad-supported subscription. We do not add advertisements to the service you know. We’re even adding a new ad-supported subscription for people who want a lower price while accepting ads.

The streaming service had been widely expected to launch an ad-supported subscription class for its service since co-CEO Reed Hastings said in April that he might be open to the idea.

Netflix plans to launch a new, cheaper subscription after news it lost subscribers for the first time in more than a decade last quarter.

The company recorded a loss of 200,000 subscribers in the first quarter of 2022 compared to the fourth quarter of the previous year.

It is still the largest streaming service with nearly 222 million subscribers. But the loss forced her to rethink her historically hard line against advertising.

The question now revolves around the advertising sales company that Netflix is ​​partnering with to help it enter the advertising field.

Earlier this month, the Wall Street Journal reported that NBCUniversal and Google were two of the biggest contenders.

Sarandos did not say with whom she might be involved. “We are in talks with all of them now,” he said. But it was suggested that the company could use the partnership as a temporary measure while creating its advertising activity.

Netflix closes 300 jobs after losing subscribers

The company may become a target for acquisition due to the declining share price. But the executive made clear that Netflix has everything it needs to return to growth.

He also denied recent rumors that the company might be looking to buy a streaming hardware company like Roku. We don’t need it, Sarandos said.

Netflix’s plans for a cheaper ad-supported subscription mirror those of rival Disney Plus, which also hopes to launch a similar subscription by the end of the year.

The ad-supported Disney Plus subscription comes to the US first, before expanding internationally in 2023. The company also plans to limit ads to four minutes per hour. The prices of the new Netflix and Disney Plus subscriptions have not yet been announced.

In a related development, Netflix cut about 300 jobs as part of the second round of layoffs. The company previously laid off about 150 employees and dozens of contractors in May.

The layoffs affect many different teams, most of whom are based in the United States, the company said. Besides eliminating international jobs as well. As we continue to invest heavily in the business, we have made these adjustments so that our costs grow in line with our slower revenue growth.

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Central and South America accounts for the lowest Netflix revenue per user. This makes it vulnerable to price changes. But the platform is not strategically testing the new policy in the region’s largest broadcasting markets, such as Brazil and Mexico.

The platform will likely use its findings in these three smaller markets to dictate password-sharing policy globally, as the company looks to expand its password-sharing campaign by the end of the year.

The streaming service began trialling password-sharing solutions in March in Peru, Chile and Costa Rica. This caused subscribers in these markets to pay an additional fee to enable broadcasts to others outside their homes using the same account.

Consumers in Peru say that more than two months after the policy was first announced, they have not received uniform messages about the new fees and do not appear to be subject to the same policies.

The level of application of the policy varies from user to user. Some users on joint accounts reported that they ignored validation prompts without any penalty to the account holder.

While another user said that he did not receive any information about the policy change and continued to share his accounts without a problem.

There is also confusion surrounding Netflix’s definition of family. Some may consider their close family members to be part of the family. The platform seems to understand this mystery.

An anonymous customer support representative in Peru told me she was asked to provide verification codes to subscribers who call about someone in their family using their account from another location. This allows members outside the subscriber’s home to continue using the joint account for free.

Netflix’s efforts on this matter are messy

” While we started working on paid sharing over 18 months ago, we’ve been clear for five years that a Netflix account is for people who live together in a single home ,” a spokeswoman for the platform, Kumiko Hidaka , said in a statement.

We alerted millions of members who actively share an account in these countries by email. However, because of the significance of this change, we are slower intensifying in-product notifications.

The cost of an additional account is less than the cost of registering for a new separate account. Netflix charges an additional fee of $2.89 in Chile, $2.99 ​​in Costa Rica, and $2.13 in Peru for adding up to users outside the account holder’s home.

The password-sharing campaign was imminent after the platform reported losing subscribers for the first time in more than a decade in its latest earnings report, even though it still has 74.58 million subscribers in the US and Canada and 222 million globally.

The company is set to go through quite a few transformations as it tries to find new subscribers and struggles to hold on to its subscribers in the face of increasing competition.

This year, the company is moving to offer a cheaper, ad-supported plan. This plan provides a cheaper way to survive after long-term subscribers have seen a year-on-year rise in prices. It is also exploring live streaming in an effort to compete with Disney Plus, which continues to grow.

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According to the source , except profiting from the sale of devices, subscriptions have become an important component of Apple's business.

Restructuring the Apple service business

Eddy Cue, Apple's senior vice president in charge of services, is said to be trying to restructure the company's lucrative "services" business to focus more on broadcasting and advertising, the source said.

The roles of many of the top executives in this sector have been updated by Eddie Coe.

Citing the source , the report indicated that as part of the restructuring, Peter Stern, Apple's vice president of services, will not deal with advertising, and will instead focus on videos, iCloud and other service segments.

On the flip side, advertising vice president Todd Terrace is said to be taking on more responsibility, and has been reporting directly to Eddie Coe since the start of 2022.

Apparently Apple has identified broadcasting and advertising as two potential revenue growth prospects, with an individual familiar with the matter claiming that Apple's advertising business is now "large enough to live on its own".

Why did Apple take this step?

Apple's services brought impressive revenue and subscriber numbers, driving these moves.

According to 9to5Mac, search ads in the App Store, Apple's only source of advertising, rose 238% to $3.7 billion in 2021 and are expected to reach $5.5 billion by the end of this year.

According to the survey, changes to Apple's privacy standards, such as app tracking transparency, have prompted more developers to invest in search ads in the App Store.

Apple and sports offers

Apple Insider reports that the iPhone is also ramping up its sports offerings as part of its streaming strategy. The tech giant has added "Friday Night Baseball" to the streaming service and is trying to win the rights to the "NFL Sunday Ticket".

Apple is also seeking the rights to broadcast NBA games on its Apple TV + platform.

Meanwhile, Mac Rumors famous that sports content will attract new viewership for Apple TV+, which Apple has been building since its 2019 launch.

Apple still has a limited amount of original content compared to other streaming services, and it can't attract the same subscriber numbers as Hulu, Netflix and Disney+.

Apple TV +, iCloud, Apple Fitness +, Apple News +, Apple Music, App Store, Apple Care +, Apple Arcade, Apple Pay and more are included in the category of services that has grown rapidly over the past several years.

Apple has made a regular profit from the services over the years. The sector generated $19.8 billion in the moment quarter of 2022, a year-on-year increase of $17 billion.

Separately, it was reported that Apple is also working on new services, such as a potential "buy now, pay later" banking service and Instacart-style delivery service with a focus on nutrition.

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In the meantime, the debate on “fair cost sharing” is “in full swing”.
In a statement published in December, the presidents of 13 European telecoms groups said that large Internet providers must invest in network growth.

The argument is constant: while the network operators finance the networks, internet services generate income from the data traffic that passes through the networks. For this reason, Deutsche Telekom proposes to modify the regulations at the EU level, since most of the data traffic is generated by IT companies.

Frontier Economics estimates traffic-related network expenses in Europe to be between €36 billion and €40 billion a year for Deutsche Telekom, Orange, Telefónica and Vodafone.

This amount refers only to data traffic; Other costs such as network expansion or other operating costs are not included. As a result of this research, it is impossible to quantify the proportion of data traffic in complete expenses.

According to Deutsche Telekom, another Axon study found that Google, Facebook, Netflix, Apple, Amazon and Microsoft collectively account for more than half of data traffic. These six companies have a market capitalization thirty times greater than that of the eight main European telecommunications operators combined, ”says the site. Additionally, groups achieved significant revenue growth, while European telcos saw their revenue decline by 7% during 2015.

Due to high network development costs and declining profits, Telekom requests the participation of technology companies. Axon models scenarios in which European network operators could earn €10, 20 or 30 billion annually.

Without the Internet services provided by technology companies, the offer of network operators would be much less attractive.

Furthermore, these contributions from Internet service providers are incompatible with net neutrality. Provided certain companies pay for network access, a two-speed network can arise.

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