Cheaper Netflix Could Include Ads

Netflix may introduce a low-price tier that includes ads following a surprise drop in subscribers. It’s also talking again about restricting password sharing.

In the first three months of 2022, Netflix had a net loss of 200,000 subscribers on the previous quarter, the first such drop of any significance in its history.

That’s misleading to some extent as the company lost 700,000 subscribers after pulling out of Russia. However, it’s clearly a bad surprise given it predicted a net gain of 2.5 million subscribers. It’s expecting things to get worse with a net loss of two million in the current quarter, blaming it mainly on increased competition from rival streaming services and customers cutting back as inflation bites.

Reed Hastings, Netflix’s co-CEO, said the company will likely add a cheaper subscription package supported by advertising over the next couple of years. Although Netflix has a lot of consumer data on its customers viewing habits (and potentially their interests), Hastings says the advertising would be outsourced.

The company also plans to extend trials currently running in South America to  which it’s previously been largely relaxed about. In the current trial, users must pay $2 to $3 a month to add an extra user who does not live at the same address.

It appears the change of approach is driven by the theory that as Netflix was growing, password sharing was a net benefit as it helped expose the service to people who might become paid subscribers in their own right later on. Now user numbers are starting to plateau, that theory may longer hold.

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