This was always going to happen sooner or later.
Netflix is considering establishing an ad-supported tier, which goes against its brand promise of being commercial-free. Because of stay-at-home orders, the streaming company witnessed membership growth that outpaced projections in the early days of the epidemic. To be safe, Netflix warned its stockholders that when governments throughout the world relax lockdown restrictions, viewership and memberships will decline.
People also stopped paying for memberships and switched to free or low-cost streaming options.
Netflix just reported its first quarterly subscriber decline in more than a decade, demonstrating this effect. Netflix lost 200,000 customers, meaning it will fall short of its 2.5 million subscriber goal for the quarter. This quarter, they will also lose another 2 million global members.
Netflix’s stock plummeted by 25% as a result of these first-quarter results.
Spencer Neumann, Netflix CFO said:
“Netflix doesn’t have a “religion against advertising”
Netflix co-CEO Reed Hastings said that competing streaming services like Disney, Hulu, and HBO have adopted the ad-supported tier, which is why they’re looking at it. Netflix, on the other hand, will avoid data tracking and ad-matching.
“The online ad market has advanced, and now you don’t have to incorporate all the information about people that you used to. We can stay out of that, and really be focused on our members, creating that great experience,” said Hastings.
“Those who have followed Netflix know that I have been against the complexity of advertising, and a big fan of the simplicity of subscription. 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, get what they want, makes a lot of sense,” he continues.
Netflix co-CEO Reed Hastings:
The consumer choice “makes a lot of sense”
In a year or two, Netflix will provide a lower-cost ad-supported membership package. Because 100 million users now exchange passwords, the company is launching a global password-sharing crackdown.