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Netflix confirms ad-funded tier – here are our big questions

Netflix has confirmed an ad-supported subscription tier is coming, breaking one of the last core tenets the company has operated under.

Speaking at the Cannes Lions festival, co-CEO Ted Sarandos said the tier would give viewers the opportunity to subscribe to Netflix for a lower price, but I the comments come just months after his CFO told an investor conference “never say never, but it’s not in our plans.”

In an interview with Kara Swisher for the Sway podcast (via The Hollywood Reporter), Sarandos said it could help Netflix reach new people. More likely though, it’ll be a way to bring back lapsed subscribers who’ve been priced out of Netflix by continual price hikes, and now have more options for spending their streaming budget.

Anyway, Sarandos said: “We’ve left a big customer segment off the table, which is people who say: ‘Hey, Netflix is too expensive for me and I don’t mind advertising.’

“We adding an ad tier; we’re not adding ads to Netflix as you know it today. We’re adding an ad tier for folks who say, ‘Hey, I want a lower price and I’ll watch ads.’”

Price and how many ads?

What that lower price will amount to remains to be seen, as does how many ads viewers will have to contend with when signing up to the ad-funded tier.

If Netflix can keep it to pre-roll ads, that may be more palatable to some viewers. However, if Netflix goes the whole hog and has ads before and during episodes, a la television and Hulu with Ads with 3-4 minute commercial breaks, then it really would go against one of the company’s core principles.

Reports earlier this week suggested Netflix is in talks with Google over running its ad business. Google, of course, is the biggest seller of online video ads through YouTube, so the brief pre-roll model that may be one model we end up seeing.

The quotes come to press at the same time Netflix confirmed a further round of 300 layoffs.

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