Netflix · Strategy · Senior · 45 to 60 minutes

Should Netflix add an ad-supported tier?

Netflix is a global streaming service that sells internet video entertainment through paid memberships. Answer this product management case and get it graded line by line against a weighted rubric.

Strategic thinking
Monetization
Financial modeling
Decision making
Written communication

The situation

The VP of Product and the CFO have asked you, a senior PM in monetization, for a recommendation on whether Netflix should introduce a lower-priced plan that includes ads. Leadership believes a cheaper option could bring in viewers who currently see Netflix as too expensive, especially in price-sensitive segments. But the same move could also push current members to downgrade from higher-priced plans, which could reduce subscription revenue and change how customers perceive the service. Advertising might offset that loss, but it is less established than Netflix's core membership business and could create execution risk across product, sales, operations, and brand. Leadership needs a decision framework now because packaging choices affect roadmap and go-to-market planning, and they cannot wait for perfect data. The hard part is that subscriber growth alone may favor one path, while long-term revenue growth may favor another. You need to recommend whether Netflix should add an ad-supported tier, keep the current model, or pursue a phased version of the idea.

What to produce

Write a 1 to 2 page decision memo.

Your answer must

State the decision objective explicitly and explain why that objective is the right north star for this choice.
Compare at least two options, including keeping the current plans and launching a lower-priced ad-supported plan.
Use Assume once, then show a simple illustrative revenue model that includes new member acquisition, downgrade or cannibalization risk, subscription revenue impact, and ad revenue impact.
Make a clear recommendation and explain the biggest second-order risks, including customer experience or brand tradeoffs.
List the most important unknowns and the specific data or signals that would change your recommendation.
Define 3 to 5 success metrics for the first year if Netflix proceeds.

Constraints

Use only the information in this prompt, any figures must be clearly labeled as assumptions.
Do not optimize for subscriber count alone, tie the recommendation to long-term revenue growth.
Do not invent unrelated products, partnerships, or market events outside Netflix's core streaming and membership business.
Assume leadership needs a recommendation despite incomplete data.

Format

Use short headings, a small assumptions table, and a simple option comparison.

How Netflix actually played it

A decision framework applied to whether Netflix should launch a cheaper ad-supported plan. It sets long-term revenue growth as the goal rather than subscriber count, then compares options with simple revenue math and risks.

Define the objective before comparing options
Model cannibalization, not only new subscribers
Show your decision framework out loud and note what data would change the call

Built from Decision-making Question: Netflix Ad-Supported Tier Decision by Ajitesh, Tough Tongue AI (PM Interview Prep Weekly).