Streamer likely to offer multiple ad-supported tiers

Netflix is likely to offer multiple subscription plans with ads in the future, the company’s co-Chief Executive Ted Sarandos said on Tuesday, just weeks after the streaming giant rolled out its first ad-supported option.

For viewers who don’t want to see commercials, Netflix already offers multiple plans ranging in price from $9.99 a month to $19.99 a month. And the company will likely do the same for its ad-supported model as the business grows, Sarandos said at the UBS TMT conference.

“We have multiple tiers today, so it’s likely we’ll have multiple ad tiers over time, but nothing to talk about yet,” Sarandos said. “And the product itself will evolve, I suspect, pretty dramatically, but slowly, gradually.”

After resisting advertising on its platform for years, Netflix last month released a cheaper, $6.99 option with commercials in partnership with Microsoft. The move comes as Netflix faces pressure to find new ways to expand revenue as subscriber growth slows and competition intensifies.

In another effort to grow revenue, Sarandos also said Tuesday the company will focus on addressing password sharing in 2023. Netflix has said more than 100 million households, including 30 million in the U.S., are using a shared password.

Sarandos compared the upcoming crackdown on password sharing to increasing prices, which he said doesn’t make consumers happy. It’s why he said the company is focusing on how to address the issue in a way in which customers will “see the value in Netflix.”

“There are folks who are enjoying Netflix, literally for free today,” Sarandos said. “So, they’re getting a lot of value out of it. I think they’ll be happy to have their own account.”

Netflix priced its “basic with ads” option just below its competitors’ prices. Subscribers to the tier are shown an average of four to five minutes of commercials each hour and can’t download movies or TV series.

A limited number of TV series and movies aren’t initially available on the ad-supported tier due to licensing restrictions, but Sarandos said Tuesday about 90% is included and negotiations will start soon to include the rest.

Last week, Netflix founder and co-CEO Reed Hastings acknowledged at The New York Times’ Dealbook conference that he initially didn’t believe in the ad-supported model for Netflix and was slow to come around to it.

“I was wrong about that. Hulu proved you could do that at scale and offer customers lower prices. We did switch on that,” Hastings said. “I wish we had flipped a few years earlier on that, but we’ll catch up.”

In addition to Hulu, streaming competitors like Warner Bros. Discovery’s HBO Max, NBCUniversal’s Peacock and Paramount Global’s Paramount+ offer cheaper, ad-supported subscription options. Disney+ also plans to launch a tier with advertising, while also raising prices for its commercial-free option and other streaming services.

Disclosure: Comcast’s NBCUniversal is CNBC’s parent company.