Netflix Inc (NASDAQ:NFLX) is looking to amend its programming agreements with major Hollywood studios to enable advertising-supported content on its streaming service, according to media reports.
The company has begun discussions with Warner Bros Discovery Inc (NASDAQ:WBD), which produces the hit stalker drama You, Universal Corporation (NYSE:UVV), which produces the dark comedy Russian Doll, and Sony Group Corp (NYSE:SONY) Pictures TV, which produces The Crown and Cobra Kai, the Wall Street Journal reported, citing people familiar with the matter.
Netflix will also need to renegotiate agreements for old television shows it carries, including Breaking Bad from Sony and NCIS from Paramount Global, the report said.
The streaming giant announced in April that it was considering launching a lower-priced tier with advertising after losing subscribers for the first time in a decade.
Some entertainment executives estimate that studios will seek a premium of 15% to 30% over existing contracts to allow Netflix to air their content on an ad-supported platform.
Netflix must obtain permission from the production companies if it wants to offer an ad-supported tier as robust as its commercial-free plan.
The company produces a large amount of original content and also licenses many of its original shows and acquires content from other companies.
Netflix co-chief executive Ted Sarandos said last month that the company was in discussions with several studios about advertising partnerships.
As the pandemic boom in streaming fades, competition tightens, and rising inflation pinches consumer spending on entertainment, Netflix's main rival, The Walt Disney Company (NYSE:DIS)'s Disney+ has also stated that it will introduce an ad-supported tier.