Netflix in Talks to Include Licensed Shows and Movies for Upcoming Ad Tier

In early 2023, Netflix expects to have a cheaper, ad-supported tier for subscribers to choose, and it sounds like that when that ad tier arrives, the streaming giant is looking to have licensed content available for those users. During Netflix's second quarter earnings interview on Tuesday, co-CEO Ted Sarandos said that they're in talks with studios to be able to offer licensed movies and television shows to the ad-supported tier — though if that doesn't work out, he still thinks users will have a good experience.

"Today the vast majority of what people watch on Netflix we can include in the ad supported tier today," Sarandos said. "There are some things that that don't that we we're in in conversation with the studios on, but if we launched the product today the members in the ad tier have a great experience and we will clear some additional content but certainly not all so we're looking but we don't think it's a material holdback to the business."

For the moment, the ad-supported tier of Netflix is currently being tested by subscribers in Latin America and while exact pricing and other information has yet to be revealed, the company's latest note to shareholders said that it "makes sense" to offer the lower priced tier.

"Our lower priced advertising-supported offering will complement our existing plans, which will remain ad-free," the company said in a letter. "Our global ARM has grown at a 5% compound annual rate from 2013 to 2021, so it makes sense now to give consumers a choice for a lower priced option with advertisements, if they desire it."

Netflix revealed last week that the ad platform will see them partner with Microsoft.

"They are investing heavily to expand their multi-billion advertising business into premium television video, and we are thrilled to be working with such a strong global partner," the company said about its new Microsoft partnership. "We're excited by the opportunity given the combination of our very engaged audience and high-quality content, which we think will attract premium CPMs from brand advertisers."

It added, "We'll likely start in a handful of markets where advertising spend is significant. Like most of our new initiatives, our intention is to roll it out, listen and learn, and iterate quickly to improve the offering. So, our advertising business in a few years will likely look quite different than what it looks like on day one."

It was also recently reported that Netflix is considering syndicating some of its older original series to broadcast networks around the world as another strategy for additional revenue. Netflix has made headlines over recent months with reports of lost subscribers and waves of layoffs. On Tuesday, Netflix said that it lost one million subscribers in the second quarter of this year, the second straight quarter it suffered net subscriber loss.