Netflix has rejected ads for years. In the first quarter, the streaming service reported a loss of 200,000 subscribers. This has been its first loss in subscribers.
The CEO of the firm, Reed Hastings, stated that Netflix is open to accepting ads , as it would offer its services in a lower-priced, ad-supported format.
Within the next couple of years, the company would offer an ad-tiered model or AVOD. Currently, Netflix offers its viewers three subscription plans. The lowest plan is priced at $10, while the highest plan which has features such as account sharing and superior picture quality, is priced at $20. The standard tier costs $15.49 a month. Ad-supported Video on Demand or AVOD is a type of streaming video service that is funded by advertisement. For instance, YouTube is a service that is free to consumers but is ad-supported.
Netflix’s move to offer an AVOD tier does not come as a surprise. However, most customers find ads intrusive and annoying. For such customers, Netflix should find a way to make ads seem less like an interruption and more like an experience. A price hike for its plans, ranging between $1 and $2, cost the firm the loss of 600,000 subscribers across Canada and the US.
According to Hastings, frequent password sharing among account holders is also acting as a roadblock in the company’s growth. There is a consumer demand for ad-supported and relatively cheaper content. The ad-supported tiers of the competitors of Netflix such as HBO Max and Disney+ are examples of this. This move could have been a necessary one for the platform to remain competitive.
The Russian invasion of Ukraine also plays a role in the reduction of paid subscriptions. This move would allow certain price-conscious customers to continue with the service and would also open up a platform for revenue.
Opening Up to Other Things
Netflix seems to have opened to a lot of things that it has resisted so far. Its co-CEO Ted Sarandos has stated that they are not entirely doing away with the possibility of moving into live sports either. Moving to sports could be a path to yet another revenue stream and profit. Raising prices repeatedly will not be an effective strategy to adopt, the company has to be on the lookout for other options.
The company is facing stiff competition from other streaming platforms. Its stocks have dipped by 305 since the announcement of its April 19 earnings. These factors have definitely played a role in taking such a decision. The ad model has also proved to be successful for its rivals such as Hulu and Disney and it might also work for Netflix.
Customers who are averse to ads will continue to have access to ad-free plans. The company has experimented with its pricing in international markets, in countries such as India and Kenya. It has even offered a free mobile plan in Kenya. This has apparently led to a growth in its market.
As Co-CEO at 5W Public Relations, Dara Busch oversees 5W’s Consumer Practice, which includes Travel & Entertainment, Apparel & Accessories, Non-Profits, Home & Housewares, Health & Wellness, Mom & Baby, Beauty & Grooming, and Consumer Packaged Goods.