Netflix plans to introduce a plan supported by low-cost advertisements, in a major departure from the previous company’s attitude towards advertising on the platform. It comes in the background of the service posted the first quarterly customer losses in more than a decade.
Netflix Co-CEO Reed Hastings revealed this step during the company’s income conference call on April 19, noting that they would try to find out “for the next one or two years”.
“Those who have participated in Netflix know that I have opposed the complexity of advertising, and severe fans of the simplicity of subscribing,” said Hastings. “But as much as I fans, I am a fan of larger consumer choices. And allow consumers who want to have a lower price, and tolerant ads, get what they want.”
Hasting noted that this was “not short-term improvement” and showed that their changes in the attitude were driven by the success witnessed by their rivals.
“I thought it was quite clear that it worked for upstream, Disney did it, HBO did it. I don’t think we have a lot of doubts that it works, that all companies have found it. I’m sure we can only enter and find out as opposed to testing it and maybe do it or maybe Don’t do it “said Hastings.
Some rivals Netflix in India including Disney + Hotstar, Zee5, Voot and MX Player also offer ad-supported ads to consumers. Amazon also offers streaming services supported by Minitv ads in its flagship shopping application in India.
Why Netflix growth slowed
On April 19, Netflix said losing 200,000 customers during the first quarter of 2022, the first time he witnessed a decline of customers since 2011. The company also projects that it will lose 2 million customers in the second quarter at this time.
“The penetration of our relatively high household – when including a large number of household sharing accounts – combined with competition, is creating headwinds’ income growth” the company said in a letter to shareholders.
Netflix estimates that more than 100 million households share their accounts, including more than 30 million in the United States and Canada.
Lamban economic growth, increasing inflation, geopolitical events such as Russian invasion to Ukraine, and continued disturbances from Covid also contributed to slowing growth, said the company.
Turning off its services in Russia resulted in the company lost around 700,000 customers.
In the letter, Netflix also recorded that the main challenge for the growth of membership “advanced soft acquisition in all regions”.
Asia Pacific is a saved grace
The Asia Pacific region (APAC), which includes India, is a grace that saves overall for the company during this quarter because it adds 1.09 million paid members in the region. But this was a decline from 2.58 million additions of members in the previous quarter and 1.36 million additions in the quarter in accordance last year.
To be sure, the Asia Pacific region is the smallest area for the company, trailing North America, Latin America and Europe. 33.7 million customers in the region reached 15.2 percent of the total service of 221.64 million members. However, it has been obtained important in recent years as Los Gatos, California-based streaming services depend on the international market for growth.
“We made good progress in APAC where we saw good growth in various markets including Japan, India, the Philippines, Thailand and Taiwan. During the long term, most of our growth will come from outside the US” said the company in Shareholder Letter .
In December 2021, the company reduced Indian prices for the first time since the entry in 2016, with the biggest decline in the entry-level plan, now available at Rs 199 per month compared to Rs 499 per month earlier.