Netflix plans to offer cheaper ad-supported tiers to consumers for years to come as it looks to grow its subscriber base amid stiffer competition from rival companies.
The firm, which reported a loss of 200.000 subscribers in the first quarter, will unveil the plans backed by changes to the advertising model to give customers more choice, the company's co-CEO Reed Hastings said on the line. profit increase.
The upcoming advertising plans will mark a major departure from the way Netflix has approached it in its 25-year history, in which it has amassed nearly 222 million customers.
Netflix has been asked repeatedly over the years if it would ever consider running ads on its platform, an idea it has consistently rejected. in a conference in 2017 Hastings suggested that the company was not ready to compete with Facebook and Google in such advertising.
Hastings has pitched a radical change to the market, saying the ad model has matured enough and proven successful for rivals like Hulu and Disney. "We have no doubt that it works."
Disney has long offered an ad-supported tier on several of its services, including its Asia-focused streamer Hotstar. The company said last month that it plans to launch an ad-supported Disney+ plan in the United States later this year.
“Those who have followed Netflix know that I have been against the complexity of advertising and I am a big fan of the simplicity of subscription,” Hastings said. "But as much of a fan of that as I am, I'm a bigger fan of consumer choice."
“Allowing consumers who would like a lower price and tolerate advertising to get what they want makes a lot of sense,” he said, adding that the company does not see the ad-supported model as a “short-term fix.”
Customers who don't want to see ads will continue to be offered ad-free plans.
“In terms of earning potential, the online ad market has definitely moved on and now you don't have to incorporate all the information about people that you used to include. We can be a great publisher and have other people do all the ad matching and integrate all the data about people… so we can stay out of it, ”he completed in his message.
The move to embrace advertising, which many analysts have long argued Netflix should have explored sooner, follows Netflix's aggressive experimentation with pricing in many markets, including India, Indonesia and Kenya in recent years to expand the reach of advertising. your service.
In December, Netflix introduced its most affordable monthly prices to date in India, where people can subscribe to Netflix for as little as the equivalent of $2,6. Last year, the company offered a free mobile plan in Kenya. The company said it is "seeing good growth" in a variety of markets, including India.
Netflix reported of your first loss of subscribers in more than a decade and said it expects to lose 2 million more global subscribers in the current quarter. Shares of the company fell as much as 27% to $256.
The company's revenue grew 10% to $7.800 billion, below Wall Street expectations of $7900 billion. The company acknowledged that its revenue growth had "slowed considerably."
"Our relatively high penetration in households, when you include the large number of shared accounts, combined with competition, is creating obstacles to revenue growth," it said in a statement.
The company blamed a number of factors for its declining subscriber base. He said the slowdown is a sign of saturation in its main markets. It also acknowledged growing competition from rivals like Disney, Paramount and Warner Bros. The company also noted that more than 100 million users consume Netflix with credentials borrowed from others.
In its quest for profit, the company said that this large base of users who don't pay for the service today is an attractive audience to convert into subscribers or get their friends and family to pay for extended service.
