Netflix eyes ad-supported tier as subscription growth slows

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Netflix said Thursday it plans to offer a cheaper, ad-supported subscription plan over “the next year or two” in a bid to expand its subscriber base.

Why is this important: As the streaming subscription market becomes increasingly saturated, analysts have argued that an ad-supported tier is Netflix’s best option for growth.

  • Shares of Netflix fell more than 20% in after-hours trading on Tuesday after the streaming giant said it lost 200,000 subscribers in the first quarter – its first subscriber loss in a decade.

Details: In a video call with investors on Tuesday, Netflix chairman and co-founder Reed Hastings said the streaming giant was considering low-cost, ad-supported packages, noting that it “made a lot of sense “for consumers to have that option.

  • On the call, he noted that while he “was against complexity in advertising,” he was “a bigger fan of consumer choice.”
  • He said any effort to introduce advertising would happen without the complex data tracking used to power individually targeted ads.

Be smart: Hastings resisted introducing advertising for years, fearing it would blur the consumer experience.

  • But on Tuesday, he admitted ad-supported plans on other streamers, like Hulu, Disney and HBO Max, were working.

The big picture: Subscription streaming services have seen subscriber growth slow in recent quarters as the landscape becomes more crowded.

  • While supply has continued to grow, the amount consumers are willing to spend on subscription streaming services has remained relatively constant over the past few years, according to data from media research firm Magid.
  • Most consumers are willing to pay around four services at once for around $10 per streaming service.
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