Netflix Is Losing Subscribers So It’s Planning to Introduce Ads

The video streaming service has revealed plans to introduce adverts as a way to offer cheaper streaming options for its subscribers.

Netflix Is Losing Subscribers So It's Planning to Introduce Ads
Netflix

Netflix shared some unwelcome news with the world on Tuesday. It announced that it is losing subscribers for the first time in ten years. The company might bring in ads to combat the situation. In a letter to the shareholders, the streaming giant shared that about 200,000 subscribers have unsubscribed from the platform. As a result, it had 221.64 million paying members this quarter compared to 221.84 million last quarter. The company also estimates to have a bad next quarter wherein the customer base will be reduced to 219.64 million people.



 

As soon as the news was shared, Netflix’s stock fell sharply, and share values dropped by over 25% when drafting this article. The company blamed the loss of membership on two factors, existing success (no new customers left) and rising competition. In the shareholder letter, Netflix stated, “Our relatively high household penetration – when including the large number of households sharing accounts – combined with competition, is creating revenue growth headwinds.”

 

The company has also estimated that in addition to over 222 million paying subscribers, about 100 million households are leaching the Netflix content via password sharing, contributing to the losses. In response, the company will soon be cracking down on password sharing. It stated that it is working on the “monetisation of multi-household sharing.” It’s a change that might impact Australia too.

 

Netflix also blamed the loss of subscribers on factors beyond control like “sluggish economic growth, increasing inflation, geopolitical events such as Russia’s invasion of Ukraine, and some continued disruption from COVID.” The company mentioned it lost about 700,000 Russian subscribers when it suspended service in the country.

Though the number of Netflix subscribers went downhill, the company still reported quarterly revenue growth of almost 10 per cent.

 

Netflix could introduce ads on the video streaming platform

In addition to cracking down on sneaky shared accounts, Netflix could soon offer a cheaper subscription tier that comes with advertising. Despite the fact Netflix Co-Founder & Co-CEO Reed Hastings has maintained he has no problem with account sharing and refuses to implement ads on the platform for years.

“Those who have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription,” says Hastings.

“But as much as I’m a fan of that, I’m a bigger fan of consumer choice. And allowing consumers who like to have a lower price, and are advertising tolerant, get what they want makes a lot of sense.”

“Think of us quite open to offering even lower prices with advertising.”

“It’s just shocking,” MoffettNathanson LLC analyst Michael Nathanson tells Bloomberg.

“Everything they’ve tried to convince me of over the last five years was given up in one quarter.”

At the time of this writing, the Netflix share price has fallen by over 40% year-to-date. The current total subscriber count is 221.6 million.

 

 (Original article posted: 20 April 2022.)



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