Netflix considers ad-supported plans as it reports huge subscriber loss

Streaming giant, Netflix, is considering the introduction of cheaper ad-supported plans. This was muted by co-CEO Reed Hastings on Tuesday at the company’s Q1 earnings interview.

He said that the company expects to conclude on this ad-supported strategy within the next year or two, saying that “but think of us as quite open to us offering even lower prices with advertising as a consumer choice.”

“Those who have followed Netflix know that I have been against the complexity of advertising and a big fan of the simplicity of subscription,” Hastings said. “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 to get what they want makes a lot of sense.”

This new strategy is expected to bring in the much needed growth numbers as the company says that inflation, rampant password sharing, the war in Ukraine and fierce competition contributed to a loss of subscribers for the first time in more than a decade. The company said it lost 200,000 subscribers in its first quarter compared to its forecast of 2.5 million subscribers and it is also predicting deeper losses ahead.

The adoption of ad-supported plans to grow its subscriber additions follows the company’s pricing experiments in different markets such as the free plan in Kenya and the reduction of subscription fees in India.

The company also noted that more than 100 million users watch Netflix by borrowing credentials from others and last month, the company said it would be cracking down on this by limiting users sharing their passwords. It said that subscribers will now pay to share Netflix outside their households.

Interestingly many of Netflix competitors are already offering cheaper, ad-supported plans. Hulu, HBO Max, NBCUniversal’s Peacock and Paramount+ all have ad-supported plans and Disney last month, announced it would introducing its ad-supported Disney+ plan late in 2022 in the U.S.