An unexpected sharp drop in subscribers has led Netflix to consider changes it has long resisted: minimizing password sharing and creating a low-cost, ad-supported subscription.
The impending changes announced on Tuesday evening are intended to help Netflix regain momentum lost over the past year. Pandemic-induced lockdowns that led to TV gavage have been lifted, while deep-pocketed rivals such as Apple and Disney have begun gouging out its vast audience with their own streaming platforms.
Netflix lost 200,000 subscribers in the January-March quarter, the first contraction the platform has seen since becoming available in most of the world, other than China, six years ago. The decline stems in part from Netflix’s decision to pull out of Russia in protest against the war on Ukraine, resulting in a loss of 700,000 subscribers.
Netflix forecasts a loss of 2 million more subscribers in the current April-June quarter.
The erosion, after a year of progressively slower growth, has rattled Netflix investors. Shares plunged more than 25% in trading after the close following Netflix’s disclosure of its disappointing performance.
Share a subscription for $3 more
The Los Gatos, California-based company estimated that around 100 million households worldwide watch its service for free using a friend or other family member’s account, including 30 million in the United States. and in Canada.
“More than 100 million households already choose to watch Netflix,” said company CEO Reed Hastings. We just have to be paid to some extent by them. »
To entice more people to pay for their own accounts, Netflix said it will expand a trial program it has set up in three Latin American countries: Chile, Costa Rica and Peru.
In these locations, subscribers can extend service to another household at a discounted price. In Costa Rica, for example, Netflix package prices range from $9 to $15 per month, but subscribers can openly share their service with another household for $3.
Netflix has not provided any additional information on how an ad-supported service tier works or how much it costs. Another rival, Hulu, has long offered an ad-supported tier.
While Netflix clearly believes these changes will help it add subscribers to its current 221.6 million users worldwide, the measures also risk annoying customers to the point of canceling their subscriptions.
Netflix had already been hit by a customer slump in 2011 when the platform unveiled plans to start charging for its new streaming service, which was then bundled free with its traditional DVD-by-mail service before expanding internationally. In the months following this change, Netflix lost 800,000 subscribers, and Mr. Hastings had to issue an apology.