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Netflix finally open to ad-supported model amidst falling subscribers

Netflix may finally adopt a cheaper ad-supported model as news emerges of falling subscriber numbers.

The streaming giant’s co-founder and CEO Reed Hastings has revealed that the company is looking into implementing a cheaper Netflix tier with ads.

At a recent earnings call interview, Hastings said that “allowing consumers who would like to have a lower price, and are advertising-tolerant, get what they want, makes a lot of sense. So that’s something we’re looking at now.”

This is quite the about turn from the company’s previous position. Hastings admitted that he had been “against the complexity of advertising” in the past, and that he was “a big fan of the simplicity of subscription”.

Why the change of heart? It might have something to do with Netflix’s recent financial results, which show that the streaming pioneer lost some 200,000 subscribers in the first quarter of 2022. What’s more, it’s anticipated that it will lose as many as 2 million subscribers in the second quarter of the year.

The company points to the Covid pandemic has being responsible for the figures, as subscribers spiked during the lockdown when people were stuck indoors and unable to work or socialise.

Of course, the fact that the company announced yet another sizeable price increase just as inflation and the cost of living went through the roof can’t have helped. While Netflix might still be the largest streaming service (if not the most critically acclaimed) with 222 million subscribers, it’s also the most expensive, so it’s the natural choice when cuts need to be made in households with multiple streaming subscriptions.

Another big problem for Netflix is password sharing. The company estimates that more than 100 million households were accessing the service through shared passwords, which is in addition to those 222 million paying customers.

Hastings claims that percentage of household sharers hasn’t changed all the much throughout the history of the company. Now that its growth is being stunted by other factors, however, Netflix is working out “how to monetize sharing”.

Presumably having a significantly cheaper ad-supported tier of Netflix will help with that.

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