As Protocol reports, the backbone of the ad-supported tier seems likely to be Netflix originals. Many of the company’s existing contracts for third-party content would allow other companies to take a slice of the ad-money pie, and while co-CEO Ted Sarandos has been trying to renegotiate those deals, it’s hard to convince other companies to willingly take less money.
“We will clear some additional content, but certainly not all of it,” Sarandos said. “But I don’t think it’s a material hold-back to the business.”
He added, “The vast majority of what people watch on Netflix, we can include in the ad-supported tier today. There’s some things that [we wouldn’t], that we are in conversations with the studios on. But if we launched the product today, members in the ad tier would have a great experience.”
Microsoft will sell all of the ads running on the service, and this tier will roll out in some markets in early 2023. “We’re launching first in the countries that have more-mature ad markets,” Chief Product and Operating Officer Greg Peters noted.
Sarandos has previously described the target audience as “people who say, ‘Hey, Netflix is too expensive for me and I don’t mind advertising.'”
The company is in need of a turnaround, following a bleak Q1 that saw their first loss of subscribers in 11 years with a Q2 in which they lost an additional one million subscribers worldwide.