When Netflix co-CEO Reed Hastings interrupted a colleague on Tuesday’s quarterly earnings call to reveal plans for an ad-supported tier, it wasn’t only analysts and investors who were taken by surprise. Earlier this week, Netflix executives indicated to staffers no decision had yet been made on the advertising move, which had been the subject of internal debate over the past few months, according to one person familiar with the situation.
In publicly committing Netflix to advertising, Hastings is making the biggest shift in Netflix’s business model in its nearly 25-year history. He had championed the “simplicity” of ad-free subscriptions for years, arguing in 2020 his belief that “we can build a better business” without it. Netflix’s opposition to advertising also underwrote its unwillingness to introduce live sports programming, co-CEO Ted Sarandos has said, which raises the possibility that along with the introduction of an ad-supported tier, Netflix may make further changes to compete with traditional TV.
The significance of the ad move isn’t just about what it does for Netflix’s business model, however. In making the policy change public the way he did, Hastings reasserted his own power at Netflix, after a period of time in which he had pulled back a little from day-to-day management in favor of Sarandos, a longtime lieutenant whom he promoted in 2020, and Greg Peters, whom he elevated to chief operating officer from product chief at the same time.