Global streaming leader Netflix first announced its plans to launch an ad-supported tier in April, and after confirming that the lower-priced option would be available to customers beginning in early 2023, the company has begun solidifying details on how its first-ever foray into advertising will work. According to a report by Bloomberg's Lucas Shaw, the streamer has decided to follow the lead of Disney+ and not show advertising on children’s programming.

Shaw’s sources indicate that not only will Netflix decline to place ads in its original kid-focused content, but that certain studios that have licensed children’s programs to the service are refusing to allow ads to be incorporated into their runs as well. What is unclear from the Bloomberg report is whether Netflix has decided to make all children’s content ad-free, or just its original offerings and those from creators who have blocked the advertising insertions.

In addition to the kid’s content, Netflix will also launch its ad-supported tier without commercials on its original movies. While that could change in the future, this was considered important in maintaining positive relationships with filmmakers, who instinctively oppose breaking up movies with ad breaks. Another factor in the decision could be how much additional money the service would have to pay out in order to incorporate ads into these high-budget releases.

Related: As Netflix Moves Towards Ad-Tier, Licensing Issues Loom; Here's How the Streamer Could Handle Them

Netflix is already renegotiating contracts with content providers in order to allow them to place ads in licensed projects. These adjustments are expected to cost the streamer an additional 10%-15% per agreement in order to further monetize the programming.

According to Shaw, while certain content owners are declining to allow Netflix to insert ads into their titles, the streamer is still allowed to run commercials before and after certain shows, depending on their original agreements. Last month, following the release of the service's second-quarter earnings report, co-CEO Reed Hastings revealed that not all titles from the expansive Netflix library will be available on the ad-supported tier.

While this could be used to incentivize consumers to sign up for the premium tier, it more likely has to do with which titles have been cleared for advertising. Netflix is able to include ads on its original series, so by making “Stranger Things,” “Bridgerton,” “Squid Games, “Ozark,” and other popular in-house titles available on the lower-priced plan, the company should be able to maximize revenue, without having to reach new deals with creators.

Some analysts believe that Netflix will be able to add $4 billion in advertising revenue in the United States alone thanks to the launch of the new subscription option. However, since the streamer has no institutional experience with advertising, it has partnered with Microsoft to help facilitate the transition.

While there will certainly be more details announced as the streaming giant works its way towards a future with advertising, with each new bit of news, customers are starting to be able to piece together what the newest iteration of Netflix will look like.

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Netflix is a leading subscription-based video streaming service that offers on-demand access to an extensive library of over 3,000 movies, 2,000+ TV shows, and a growing collection of acclaimed Netflix originals. Renowned for producing groundbreaking content, Netflix has become a cultural powerhouse with hit originals like “Stranger Things,” “Wednesday,” “Squid Game,” “The Crown,” “Tiger King,” “Bridgerton,” “The Witcher,” and “Black Mirror.”

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The platform constantly updates its catalog, introducing fresh content alongside timeless classics and international hits. Netflix’s commitment to storytelling has also earned critical acclaim, with award-winning exclusives such as “Roma,” “Marriage Story,” “The Power of the Dog,” “Mank,” and “Ma Rainey’s Black Bottom.” In 2023, their animated film “Guillermo del Toro’s Pinocchio” won an Academy Award for Best Animated Feature, further solidifying Netflix’s reputation for high-quality content.

Recently, Netflix has expanded beyond standard movies and TV titles with the addition of video podcasts, and is also exploring a digital store that would offer third-party streamers within the app.

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