Netflix to offer cheaper plans with time-tested model that it denied for years

Netflix is surrounded by streaming competitors that have launched or are close to launching less expensive, ad-supported streaming tiers, but the company has refused to be dragged into the ad game for long. However, the recent blow has forced the management to relook at a strategy that will result in cheaper plans and make subscribers emerge as real winners.

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The Content-based business model is probably going through the biggest challenge – the sustainability of the subscription model. Irrespective of the industry or nature of the content, companies are finding it hard to maintain the stickiness of their paying customers, and Netflix is no exception!

After years of being in a denial mode, Netflix is now open to offering ad-supported lower price plans in a bid to retain losing customers.

According to Netflix co-founder and co-CEO Reed Hastings, the company is currently looking into the possibility and “trying out over the next two years.

Hastings is now paddling the idea of adding an advertising-supported tier as something that makes “a lot of sense for consumers who would like to see a lower price but are tolerant of advertising.

The ‘awakening’ happened after the surprise discloser in Netflix’s first-quarter result. The company lost 200,000 subscribers in the first quarter of 2022. However, this could be just the beginning of the bigger problem the streaming giant is staring at. The severity of the situation could be well understood from the fact that it has estimated the loss of another 2 million in ongoing Q2 2022.

Netflix reportedly having 222 million subscribers worldwide by the end of Q1 2022.

Netflix appears to be open to many experiments after the discloser on Tuesday that left investors and management quite concerned. Ted Sarandos, co-CEO of Netflix, even laid out what may be required for a long-rumored move in live sports. Deadline quoted him as saying “I’m certainly not saying we won’t do sports, but we’ll need to see a pathway to growing a huge revenue stream and a great income stream with it,” which is quite a departure from the flat Netflix offers.

Netflix is not the only company that would introduce an ad-supported tier. Peacock, Hulu, and HBO Max, have already started offering plans that allow consumers to pay less (or nothing, in the case of Peacock) in exchange for filling advertisements every 20-30 minutes of the gap in the shows. Disney also announced it is adding an advertising-supported option for Disney Plus by the year-end.

Netflix currently charges $10 per month for its basic tier and $15.49 for its standard tier. It charges $20 per month for Netflix’s premium tier. These are the revised subscription plans the company introduced quite recently.

Hastings said that he was proud of Netflix’s price spread, but also emphasized the fact that the company has limited options to make more money other than raising prices at regular intervals. However, the recent blow to the company has forced the think tanks of the streaming giants to go back to the drawing board.

Besides introducing the ad-supported lower price plans the company is also gearing up for a massive crackdown on password sharing. Nearly 100 million households are enjoying the services of the streaming giant without paying a dime, the company quoted in the filing. Both the strategies, once implemented, could result in an increased customer base and create another revenue stream.


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