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Netflix Considers Low-Cost Streaming Tier With Ads, After 1st Drop in Subscribers in a Decade

Netflix CEO Reed Hastings said on Tuesday that the company is considering introducing an ad-supported streaming tier at a lower subscription cost. Hastings said, "Those that have followed Netflix know that I've been against the complexity of advertising and a big fan of the simplicity of subscription. 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."

Hastings' statement follows Netflix's Tuesday announcement of a decrease of about 200,000 subscribers from January to March — far below the company's earlier projection of a gain of 2.5 million subscribers. This is the service's first drop in subscriptions in a decade.

Netflix attributed the drop to its already high household penetration, account password sharing, and increasing competition. It also cited broader economic factors such as inflation and the war in Ukraine. (Netflix's suspension in Russia alone resulted in a loss of 700,000 subscriptions.) The drop in subscriptions led to Netflix's stock price dropping about 25%.

Netflix projects a further decrease of around 2 million subscribers in the April-June quarter. The addition of a low-cost ad-supported subscription would be one attempt by the company to stem the subscriber bleed.

The streaming service only recently implemented a price increase in subscription plans in the United States and Canada earlier this year.

Meanwhile, anime streaming service Crunchyroll recently removed its long-running free ad-supported simulcast viewing option in the beginning of the spring anime season in April, with only a few exceptions. (Some spring season titles are available for free ad-supported viewing for their first three episodes a week after they premiere, and older titles are still available for free with ads.) The service previously allowed free ad-supported streaming for simulcast titles one week after an episode premiered.

Disney+, another streaming service that is adding more anime titles, plans to roll out an ad-supported subscription tier in the United States and Canada in late 2022, and then roll it out overseas next year.

Source: IndieWire (Christian Blauvelt) (link 2: Tony Maglio)