This was bound to happen earlier than expected. Netflix is going against its brand proposition to remain commercial-free and is beginning to explore introducing an ad-supported tier.
The streaming giant saw subscriber growth that exceeded expectations during the early days of the pandemic thanks to stay-at-home orders. Staying precautious, Netflix also told its shareholders that viewership and subscriptions would decrease as governments around the world ease restrictions on lockdown.
People also cut subscriptions and moved to free or cheaper streaming services.
And that effect is being seen with Netflix reporting its first quarterly subscriber loss in more than a decade. Netflix lost 200,000 subscribers which means it’s going to miss its target of adding 2.5 million subscribers in this period. They are also going to lose another 2 million global subscribers this quarter.
These first-quarter results tanked the stock with Netflix shares going 25% lower.
Netflix doesn’t have a “religion against advertising”
Spencer Neumann, Netflix CFO
Speaking on why they’re exploring ad-supported tier, Netflix co-CEO Reed Hastings shared that its rival streaming platforms have embraced this model including Disney, Hulu and HBO.
But unlike them, Netflix will stay off data tracking and ad-matching.
“The online ad market has advanced, and now you don’t have to incorporate all the information about people that you used to. We can stay out of that, and really be focused on our members, creating that great experience,” said Hastings.
“Those who have followed Netflix know that I have been against the complexity of advertising, and a big fan of the simplicity of subscription. But as much as I am a fan of that, I am a bigger fan of consumer choice. And allowing consumers who would like to have a lower price, and are advertising-tolerant, get what they want, makes a lot of sense,” he continues.
The consumer choice “makes a lot of sense.”
Netflix co-CEO Reed Hastings
Netflix will bring a lower-cost ad-supported subscription plan in a year or two. The giant is going on a global password-sharing crackdown as 100 million accounts currently share passwords.
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