Netflix considers a cheaper ad-supported tier after losing subscribers for the first time in 10 years

Netflix executives have previously not been so open about introducing a cheaper subscription tier supported with advertisements. But that seems to be changing after the company confirmed it lost subscribers over the last quarter.

The company released a letter to its shareholders for the first quarter of 2022 and confirmed that Netflix lost 200,000 subscribers in the last three months. This is the first time the streaming giant reported a membership loss for a quarter over the last 10 years. And the streaming giant said in its forecast that it expects to lose 2 million paid memberships in the second quarter of the year. Netflix shares plunged by more than 25 percent after trading hours on Tuesday.

Following this series of bad news, Netflix seemed to have softened its stance on ad-supported lower-cost membership tiers. “Those who have followed Netflix know that I have been against the complexity of advertising and a big fan of the simplicity of subscription,” co-CEO Reed Hastings said (via CNBC) in a pre-recorded earnings call on Tuesday. “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.”

Just last month, Netflix CFO Spencer Neumann said that an ad-supported tier was not part of the company’s plans. The comment came a few days after Disney+ announced it will offer a membership plan with ads at a lower cost sometime in 2022.

In the same financial report, Netflix said it is seeing slowing revenue growth and identified several factors that caused it. For one, the company says there are 100 million “additional households” that access its services through account sharing. Netflix added that this is one of the reasons “it’s harder to grow membership in many markets.”

It is worth noting that Netflix has heavily hinted at cracking down on password sharing by introducing an Extra Member Fee that has been in testing for a month now in Chile, Costa Rica, and Peru. It is unknown if this experiment will be extended to other regions. But considering Netflix has now identified account sharing as one of the main reasons for its slow revenue growth and subscriber loss, it might be just a matter of time before the added fee becomes official worldwide.

Photo by Thibault Penin on Unsplash