Netflix is finally getting serious about offering customers a cheaper, ad-supported subscription tier.
In a recent earnings phone interview, company CEO Reed Hastings revealed that the streaming service is now "open enough" to change its business model with the goal of generating revenue and creating the most affordable price option. low for new and existing subscribers. .
The admission comes after Netflix posted quarterly subscriber losses for the first time in a decade. Since the beginning of 2022, the streamer says it has lost 200,000 paying customers, a figure that is expected to rise to 2 million by the end of June.
Netflix therefore believes that the introduction of an ad-supported subscription tier, similar to those already offered on competing platforms like Hulu and HBO Max, could help stop the bleeding, despite a long-standing aversion to the company for subscription advertising.
“Those who have followed Netflix know that I am against the complexity of advertising and a big fan of the simplicity of subscriptions,” Hastings told investors. "But as much as I'm a fan of that, I'm a bigger fan of consumer choice and allowing consumers who want a lower price and tolerate advertising to get what they want makes a lot of sense."
As for when Netflix might introduce this new subscription tier, Hastings said: "Something we're looking at right now. We're trying to figure that out over the next year or two, but think of us as completely open to offering even lower prices with advertising." as a choice for the consumer.
Hastings also cited competing streamers by name in his justification for the move. HBO launched an ad-supported subscription tier on HBO Max last year, while Disney plans to introduce a similar plan on Disney Plus later in 2022.
"It's pretty clear that he works for Hulu," the Netflix CEO said. "Disney did. HBO did it. I don't think we have much doubt that it works. All these companies got it, I'm sure we'll go in and understand instead and maybe that or not."
It's not yet clear how much Netflix's ad-supported subscription tier might cost, or what parameters this more affordable plan might place on content availability, though HBO's model offers a useful plan (for potential customers, as well as for Netflix). .
For $9.99 (about $8 / AU$14) per month, subscribers to the ad-supported version of HBO Max can access the same library of movies and TV shows as those on the standard tier, but without the ability to download content to view offline. . or stream it in higher quality at 1080p.
There has been no official word yet on the cost of the Disney equivalent level, although we anticipate similar parameters will be placed on the content available to subscribers.
Analysis: much to come
This isn't the first time Netflix has flirted with the idea of introducing an ad-supported subscription tier to its still-market-leading streaming service.
As recently as March, the company's chief financial officer, Spencer Neumann, admitted he would "never say never" when asked about the possibility, though he clarified at the time that the move was "not something in the pipeline right now."
"It's hard for us to ignore that others are doing it," Neumann told investors, "but right now it doesn't make sense to us."
However, in light of the aforementioned quarterly loss numbers, Netflix appears to have had a change of heart on the matter. The streaming giant's stock price plummeted nearly 20% following news of its hemorrhage of 200,000 subscribers, sparking a public need for immediate action.
But Netflix intends to make up for its losses in other ways, too. "Our plan is to get back to accelerating our viewing and revenue growth by continuing to improve all aspects of Netflix, especially the quality of our programming and recommendations, which our members value most," the Hastings CEO told investors.
Earlier in 2022, the streamer also unveiled a pilot program that could soon add an extra $2.99 (about $2.50 / AU$4) to Netflix accounts that share their credentials outside of the primary household. At the company's recent earnings call, it doubled down on that ambition, revealing that more than 100 million households worldwide are currently skipping monthly subscription fees.
Depending on your tolerance for ads and account sharing, Netflix is about to get a lot cheaper or a little more expensive – the choice will ultimately be yours.