Apr 19, 2022 - Technology

Netflix eyes ad-supported tier as subscription growth slows

Gif of Netflix flexing

Illustration:Rebecca Zisser/Axios

Netflix on Thursday said it is weighing offering a cheaper, ad-supported subscription plan over "the next year or two" in an effort to expand its subscriber base.

Why it matters: As the streaming subscription market becomes more saturated, analysts have argued that an ad-supported tier is Netflix's best option for growth.

  • Netflix's stock fell more than 20% in after-hours trading Tuesday after the streaming giant said it lost 200,000 subscribers in the first quarter — its first subscriber loss in a decade.

Details: On a video call with investors Tuesday, Netflix chair and co-founder Reed Hastings said the streaming giant is looking at lower priced, ad-supported plans, noting that it "makes a lot of sense" for consumers to have that option.

  • On the call, he noted that while he's "been against the complexity of advertising," he's "a bigger fan of consumer choice."
  • He said any efforts to introduce advertising would be done without the complex data tracking used to power individually targeted ads.

Be smart: Hastings has resisted introducing advertising for years, worrying it would muddle the consumer experience.

  • But on Tuesday he conceded that ad-supported plans at other streamers, like Hulu, Disney and HBO Max, are 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 consistent over the past few years, according to data from media research firm Magid.
  • Most consumers are willing to pay for roughly four services at a time for about $10 per streaming service.
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