Topline

Netflix is in talks with at least three major Hollywood studios for a lower-cost, ad-supported subscription plan, the Wall Street Journal reported Tuesday, as the company faces financial struggles amid an intensifying battle for viewers between streaming platforms.

Key Facts

Netflix is in talks with Warner Bros., Universal Studios and Sony Pictures Television to rewrite its deals with the studios to allow for the display of ads with their content, the Wall Street Journal reported, one month after the streaming service announced plans to create the new subscription tier.

The streaming service has had a long-standing goal of avoiding the visual clutter and privacy issues involved in advertising.

Studios that sell Netflix the rights to stream movies and TV shows are likely to seek 15% to 30% premiums if ads are introduced, WSJ reported, citing entertainment executives.

Netflix subscriptions currently range from a $9.99 monthly basic plan with 480p resolution, to a $15.49 standard plan with 1080p and a $19.99 premium plan with ultra high definition – compared to Disney+ ($7.99 to $19.99), Apple TV+ ($4.99), Amazon Prime Video ($6.99 to $14.99) and Hulu ($12.99 to $75.99).

It is unclear how much Netflix would receive from the Hollywood studios in a potential advertisement deal.

Forbes reached out to Netflix for comment.

Key Background

Last month, Netflix confirmed the company laid off 300 of its 11,000 employees, following the loss of thousands of subscribers in the first quarter, bringing the total number of layoffs to 450 since May. A company spokesperson told Forbes at the time the reason was “slower revenue growth.” In May, The New York Times reported Netflix informed employees that it planned to accelerate its launch of the ad-supported subscription, with a target timeframe in the last three months of 2022. Netflix’s stock has fallen 75% since hitting a peak of $690 in October.

Big Number

200,000. That’s how many subscribers ditched Netflix in the first three months of 2022 – its first decline in over a decade – falling well short of its goal of adding 2.5 million subscribers over the quarter. The streaming service has roughly 221.64 million paid subscribers, according to Statista.

Tangent

Disney+ also announced plans in May to feature commercials as early as this year in the U.S., and internationally in 2023, as it aims to amass 230 million to 260 million subscribers by the 2024 fiscal year. It currently has 87.6 million subscribers worldwide.

Further Reading

Netflix Stock Could Rally With Ad-Supported Content (Forbes)

Who Wins When Netflix Finally Shows Ads (Forbes)

Netflix Tells Employees Ads May Come by the End of 2022 (New York Times)