Netflix, seen as the big dog in the streaming wars for years, just lost 200,000 subscribers in a big quarterly announcement loss that killed their stock market price, dropping 35%. Of course, a big part of that loss is related to the war in Ukraine. The streaming giant recently closed up shop in Russia, in protest of the country’s brutal invasion of Ukraine, which cut off thousands of users from the service, and surely added to that 200K dropoff. Increased competition from Disney+, Amazon Prime Video, and Apple TV+ likely doesn’t help, as those other platforms continue to expand their international presence, potentially chipping away at Netflix’s own gains.
Now, it seems Netflix has decided to attract potential audiences that may see the $15.49 per month two-stream HD plan as being too costly. During a Q1 interview via Variety, co-CEO Reed Hastings has now confirmed that Netflix will be launching lower-cost packages that will be ad-supported, citing “consumer choice” as the reason for the move.
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“Those that have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription,” Hastings said. “But as much as I’m a fan of that, I’m 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.”
“I don’t think we have a lot of doubt that [the ad model] works,” Hastings said, citing other plans at streamers. “I’m sure we’ll just get in and figure it out — as opposed to testing it and maybe do it or not do it.”
This comes a month after the streamer’s CFO Spencer Neumann said an ad-driven model was “not something that’s in our plans.” But also adding, “Never say never.” Then again, that was before the stock market fell out underneath them.
“Right now, we think we have a great model and a subscription business that scales globally really well,” Neumann defended their subscription model last month. “We were about a $20 billion revenue business two years ago…we’re $30 billion revenue now. The growth is healthy across every region of the world.”
There is a lot of domestic competition in the U.S., however. HBO Max, Hulu, and Paramount+ don’t have a great overseas presence but that will only last so long. At some point, Netflix’s strong global numbers could see further declines as streaming options continue to grow. Meanwhile, password sharing likely isn’t helping the company either and Hastings himself said a solution to that problem is likely more than a year away.
Netflix might also want to be a little more careful with how they’re spending their dollars on content as they’re now trying to compete with major Hollywood studio blockbusters spending $200+ million on films like “Red Notice” and “The Gray Man.” While they certainly are giving customers a wealth of original content, a high volume compared to others, sometimes throwing too much content at the wall to see what sticks isn’t the greatest approach.