Netflix recently announced that they lost 200,000 subscribers in the first three months of the year (the first time that has happened in a decade) and expected to lose two million more in the months to come. And with that news, Netflix’s share price took a tumble, effectively wiping away $70 billion in the company’s market capitalization.
With so many streaming services available these days all fighting for your wallet, it’s really not surprising to see the drop in subscribers, especially when Netflix keeps raising their prices. In addition, the issue of password sharing (raise your hand if you’re guilty of this) is also affecting their bottom line. Clearly something has to change if they want to remain on top.
Cracking down on password sharing could lead to an extra 10-20 million customers in the US, but that’s only part of their growth plan. In addition, Netflix is looking to introduce a lower-priced ad-supported subscription tier, much like what HBO Max and Hulu (and soon Disney+) do, offering a discounted monthly rate in return for sitting through some ads.
According to a report by The New York Times, Netflix co-CEO Reed Hastings changed his view on an ad-supported streaming tier once their subscriber count dropped, reportedly sending a note to employees saying that executives are now aiming to introduce the new ad tier at some point in the last three months of 2022, along with a crackdown on password sharing starting in the same window, charging higher prices to subscribers who share their account with others.
“So if you’ve got a sister, let’s say, that’s living in a different city — you want to share Netflix with her, that’s great,” Greg Peters, Netflix’s chief operating officer, said on the company’s earnings call. “We’re not trying to shut down that sharing, but we’re going to ask you to pay a bit more to be able to share with her.”
It’s an interesting strategy, and given how expensive Netflix has become, I’m sure plenty of people will opt for the ad-supported tier in lieu of some financial relief, given that its standard HD streaming plan with two streams costs $15.49 a month, while its premium tier with 4K and four streams now costs $19.99 in the US.
Give me a $10 a month plan, and I’ll gladly watch a few ads! 🙂