Online entertainment subscription service, Netflix has revealed it is now considering reducing its prices and adding advertisement to its platform, as the company recorded losses of 200,000 subscribers for the first time since 2011. After years of resisting advertisements on its streaming service, Netflix co-CEO Reed Hastings said on Tuesday April 19, that the company is “open” to offering lower-priced tiers with ads.
Hastings has always opposed to adding commercials or other promotions to the platform but says now that it “makes a lot of sense” to offer customers a cheaper option.
“Those who have followed Netflix know that I have been against the complexity of advertising and a big fan of the simplicity of subscription,” Hastings said. “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 to get what they want makes a lot of sense.”
Hastings said a new ad-supported tier has a lot of profit potential for Netflix, which on Tuesday reported its first subscriber loss in more than a decade. Netflix cited its exit from the Russian market, growing competition from recent streaming launches by Disney and Amazon, rampant password sharing, inflation as reasons for fall in paid subscriptions.
In an effort to lure more subscribers, Netflix has increased its content spend, particularly on originals. To pay for it, the company says it had to increase prices of its service. A lower-tier option that includes advertisements could keep some price-conscious consumers with the service and provide Netflix with a different avenue to garner funds, Netflix said.
“It’s pretty clear that it’s working for Hulu. Disney is doing it. HBO did it.” Hastings said. “I don’t think we have a lot of doubt that it works.”