Netflix's new, cheaper plan with ads won't have everything that the more expensive plans include

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Netflix's new, cheaper plan with ads won't have everything that the more expensive plans include
"The Crown."Netflix
  • Netflix's cheaper ad-supported plan won't have the full Netflix catalog, at least not right away.
  • Netflix has to renegotiate licensing agreements with other studios.
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Netflix aims to launch a lower-cost, ad-supported plan by early 2023, the company said on Tuesday. But don't expect it to have the full Netflix catalog at launch.

Netflix has hundreds of original shows and movies on its platform, many of which is produces itself, such as its mega hit "Stranger Things."

But the company has to renegotiate licensing agreements with other studios that have produced some of its original content, as well as those that it has acquired the streaming rights from for non-original content, as those previous agreements didn't include agreements about ads being shown.

This will be an essential step in building an ad-based tier, something Netflix had previously pushed back against. But in the face of growing subscriber losses, the company is looking at new ways to boost growth.

"The vast majority of what people watch on Netflix we can include in the ad-supported tier today," co-CEO Ted Sarandos said during the company's Q2 earnings call on Tuesday. "There's some things that don't that we're in conversations with the studios on. But if we launched the product today, the members in the ad tier would have a great experience."

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"We will clear some additional content, but certainly not all of it," Sarandos added. "But we don't think it's a material holdback to the business."

The Wall Street Journal reported earlier this month that the studios Netflix was in conversations with included Warner Bros, which produces "You," and Sony, which makes Netflix's Emmy-winning original "The Crown" and produced "Breaking Bad," a show that originally aired on AMC.

A Netflix spokesperson told The Journal: "We are still in the early days of deciding how to launch a lower-priced, ad-supported option, and no decisions have been made."

Netflix reported on Tuesday that it lost 970,000 subscribers in the second quarter. It was better than its initial forecast of 2 million, but still the second quarter in a row it lost customers — the first time that's happened.

In its earnings note to investors on Tuesday, Netflix said it would first launch the ad tier "in a handful of markets where advertising spend is significant."

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"Like most of our new initiatives, our intention is to roll it out, listen and learn, and iterate quickly to improve the offering," the company said. "So, our advertising business in a few years will likely look quite different than what it looks like on day one."

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