Netflix to launch cheaper plans supported by advertising
Netflix will offer cheaper, ad-supported plans for its consumers. Despite having resisted such models in the past, Netflix’s co-CEO Reed Hastings has confirmed that the company will examine less expensive plans supported by advertising “over the next year or two.” This move arrives after the world’s largest on-demand streaming service disclosed losing 200,000 subscribers during its most recent quarter.
“Those who have followed Netflix know that I have been against the complexity of advertising, and a big fan of the simplicity of subscription,” explains Hastings. “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, get what they want, makes a lot of sense.”
The streaming giants have until now eschewed adopting an ad-supported model. Hastings suggested at a conference in 2017 that Netflix was not especially suited to competing in an advertising space dominated by the likes of Facebook and Google.
However, the recent loss of 200,000 subscribers (in a period when the company anticipated gaining an additional 2.5 million) indicates that rival companies are generating stiff competition thanks to new ecosystems presented by advertising.
Disney, for example, offers an ad-supported tier across its Asia-focused streamer Hotstar and several other services. Last month, the company announced that it will aim to launch an ad-supported Disney+ plan in the US.
“It is pretty clear that it is working for Hulu, Disney is doing it, HBO did it. We don’t have any doubt that it works,” says Hastings, detailing that the new changes will most likely feature a plan layer, similar to Hulu’s model. "In terms of the profit potential, definitely the online ad market has advanced, and now you don’t have to incorporate all the information about people that you used to. We can stay out of that, and really be focused on our members, creating that great experience."
The shift to adverting follows Netflix’s experimentation in pricing across its global markets. In December 2021, the company created its most affordable monthly pricing tier to date in India, offering subscription fees of USD2.6. Netflix also introduced a free mobile plan in Kenya.
Despite Netflix report its first subscriber loss in over a decade, the company’s leadership team remains optimistic about the shift towards new advertisement models. COO Greg Peters emphasises that advertising “is an exciting opportunity” for the company, and Hastings adds: "Think of us as quite open to offering even lower prices with advertising as a consumer choice."
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