The era of watching tv shows on Netflix without interruption by commercials is coming to an end. Netflix is putting together plans for some subscribers to be able to choose cheaper, ad-supported plans.
Netflix announced at its recent earnings call that it lost 200,000 subscribers in a quarter. It also forecasts that its subscribers would fall by another 2 million in the current quarter, to about 219.6 million.
After this announcement, Netflix shares dropped over 25%, cutting off $30 billion from the company’s market valuation.
Onetime Netflix informed shareholders that it would add 2.5 million net subscribers during the first quarter. A year after, Netflix added 3.98 million paid users during the same period.
The company said the suspension of its service in Russia and its paid memberships resulted in a loss of 700,000 subscribers. Also, Netflix ascribed part of the downshift to saturation in its biggest markets by acknowledging the impact of rising competition from streaming services launched by classic media groups like Disney and Paramount.
Hence, Netflix wants to maximize income from existing subscribers and viewers by eliminating password sharing and introducing cheaper ad-supported plans. This implies that the company is receptive to exploring an alternative business model.
Reed Hastings, the CEO of Netflix, said, “We’re thinking of how to monetize sharing. We’ve been thinking about that for a couple of years. When we were growing fast, it wasn’t a high priority to work on; now we’re working super hard on it.”
“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,” he added.
Although Netflix has increased prices six times in the last eight years, they recently introduced a $3.99 mobile-only plan that costs 50% less than the standard plan in Africa as they have been unable to penetrate the African market because of the high poverty rate.
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Image Source – Netflix
