Netflix is Considering Ad-Supported Plans to Attract New Subscribers

Netflix is open to the idea of introducing cheaper ad-supported plans to address its growth problems. After Netflix announced yesterday that it had lost 200,000 subscribers in the first quarter of 2022, CEO Reed Hastings said during the company’s earnings call (via CNBC) that the streaming service may change its stance regarding the presence of advertisements on the platform.

“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 during the earnings calls. “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.”

In recent years, Netflix regularly raised its prices to maintain its capability to invest in exclusive content. The latest price hike happened in January when Netflix raised the price of its different tiers in the US and Canada by $1 to $2 per month depending on the plan. In addition to increasing its investments in Netflix Originals, the company has also started offering access to a small selection of iOS and Android games to its subscribers.

Netflix is facing increased competition from other SVOD services such as Amazon Prime Video, Disney+, HBO Max or Apple TV+, and some of these services have already introduced cheaper ad-supported tiers. “It’s pretty clear that it’s working for Hulu. Disney is doing it. HBO did it. I don’t think we have a lot of doubt that it works,” Hastings said.

It remains to be seen if Netflix is really willing to change its business model and introduce ads on the platform. The streaming service also made it clear yesterday that it was ready to take new measures to stop password sharing between different households. Last month, the company already announced an upcoming experiment in Chile, Costa Rica, and Peru, where subscribers will be offered a new paid alternative to password sharing.

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Conversation 10 comments

  • hellcatm

    20 April, 2022 - 1:18 pm

    <p>I think Netflix is getting it wrong. Just because people are unsubscribing doesn’t mean they’re doing it forever. Also, people are unsubscribing because there are so many services out there and not everyone can afford to pay for all of them. On top of that Netflix just raised their prices again. Will an ad-supported tier work? Maybe, but I don’t think it’ll be the big spike they hope it’ll be. People hate watching commercials…especially if they have to pay to watch commercials. Maybe if they made the commercial tier free, but they won’t do that. Companies will be companies, they will never learn by looking at the big picutre.</p>

  • brandonmills

    20 April, 2022 - 1:43 pm

    <p>They got very aggressive with price increases. I think the correct move is the rollback price, give users who paid the higher price something for doing so, and then adding an even cheaper ad supported model. However, I fear some people in high places don’t want to admit they got it wrong with rapid price increases.</p>

  • mattbg

    Premium Member
    20 April, 2022 - 2:24 pm

    <p>They should have already done this by now, if only because everyone else is doing it. The whole "no ads" thing was a gimmick to drive growth. I will be sad to see it go, but if people don’t want to pay for what a true ad-free service costs then I don’t blame them for going the other way.</p><p><br></p><p>They could even go further. If they suspect you are sharing someone else’s account, they can show you ads until you prove that you are not sharing. Let’s see if people who are probably not paying for it want to complain about ads and threaten to "cancel" :)</p>

    • lvthunder

      Premium Member
      20 April, 2022 - 3:53 pm

      <p>How can you prove you are not sharing?</p>

      • mattbg

        Premium Member
        21 April, 2022 - 10:30 am

        <p>It’s a machine learning problem – they have so many data points on their users – IP, location, device types, etc – that can presumably can identify what a password sharer looks like with high confidence and apply that to their user base.</p><p><br></p><p>It doesn’t need to be the same for all types of users. If you have an account that seems to revolve around a household, make sure those users are logging in from the household every so often.</p><p><br></p><p>If they’re not sure, show them ads and at least get something out of it :)</p><p><br></p><p>There will be lots of cases where they can say with 99.9% certainty that the account is being shared, so those are the ones you go after first. <span style="color: rgb(0, 0, 0);">i.e. all allowed streams running frequently on non-mobile connections in different locations.</span></p><p><br></p><p>So, you prove it with your metadata. You will be presumed innocent or guilty. Presumably 2FA to the account holder can be part of the solution to confirm. At some point, it becomes an annoyance.</p><p><br></p><p>Of course, I have no idea what they will do. They are going to do what makes the most sense for their business. If they decide that they’ll lose more business than they gain by going after a certain type of password sharer then presumably they’ll focus on the ones that are most clear-cut and harmful to their business.</p><p><br></p><p>The main point is: this is a modern business that revolves around data, AI, and machine learning and there’s a lot they can do.</p>

  • lvthunder

    Premium Member
    20 April, 2022 - 3:57 pm

    <p>They lost most of those subscribers by choice. They followed everyone else and canceled service in Russia. Growth is such a weird metric to value a company on anyways. You can’t grow forever.</p>

    • mattbg

      Premium Member
      21 April, 2022 - 10:33 am

      <p>Right – they apparently had 700K subscribers in Russia. They also acknowledged that they lost a few hundred K from price hikes. So, despite that, they still only lost 200K subscribers in total and many of the hundreds of millions that they kept are paying a higher fee.</p>

  • rob_segal

    Premium Member
    20 April, 2022 - 4:41 pm

    <p>Maybe, there is nothing wrong with their current price tiers. Changing their release schedules for shows will help them retain subscribers and reduce their expenses. Instead of releasing every episode for an original show at once, they should follow the model of Disney+ and HBO Max. Release the first 1 or 2 episodes initially and a new episode every week. Public hype for shows builds for a couple of months instead of a couple of days. Peacemaker’s momentum lasted months. Same with Winning Time. Netflix has to create and release more content than HBO and Disney because none of their shows has the sustained success per season as HBO and Disney. Netflix will be able to spread their original releases out more, create less, reduce expenses, and maintain subscribers.</p>

  • stevek

    Premium Member
    21 April, 2022 - 12:10 am

    <p>People are leaving our platform…I know…we’ll add advertisements. People love those!</p>

    • red.radar

      Premium Member
      21 April, 2022 - 9:27 am

      <p>Ad supported is still a paying subscriber, The fees are paid by the Ads and companies willing to purchase them. </p><p><br></p><p><br></p>


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