Contrary to all previous statements, Netflix is now planning an advertising-financed tier. The reason could also be the falling number of subscribers.
Netflix had to accept a minus of 200,000 subscribers in the first quarter of 2022. A worrying premiere for Netflix, which has been spoiled by success because the number of subscribers has risen constantly over the past decade. For the second quarter of 2022, a reduction in the total number of subscribers by 2 million is even expected. The cause for the streaming provider is account sharing, among other things. Netflix could then take stricter action against this previously tacitly tolerated practice in the future. The terms and conditions prohibit the sharing of accounts beyond one’s own household anyway.
Is Netflix taking down account sharers?
But the reason for the decreas in subscribers could go deeper: Netflix has already increased prices in the US and UK and a price increase could also be pending for Germany in 2022. Especially since Netflix only offers 4K and HDR / Dolby Vision in its most expensive tier, which costs 17.99 euros per month. But competition has grown and people are becoming more price sensitive in times of rising inflation. Especially since competing offers such as Apple TV+ for 4.99 euros a month or Disney+ for 8.99 euros a month (or 89.99 euros a year) already include 4K, HDR / Dolby Vision and Dolby Atmos.
In addition, Netflix has lost most of its content licensed from other studios. Disney, Universal, Paramount and Warner Bros. now prefer to push their films to their own streaming offers Disney+, Peacock, Paramount+ and HBO Max. That’s why Netflix probably wants to get inspiration from them: through an advertising-financed tariff.
Netflix with ads: cheaper, but not free
Netflix is thinking about an ad-supported tier at a discount, according to co-CEO Reed Hastings. Although he himself always wanted to maintain a simple price-structure without advertising, he had to admit that customer wishes were going in that direction. And then Netflix would have to meet the needs. In the last few months, Netflix has signaled more openness to advertising-financed models, which it had vehemently rejected in previous years.
Even so, Netflix initially lost nearly 25% in value in the stock market after announcing its dwindling subscriber numbers. Especially since it could probably take another year or two before an advertising-financed stage is actually implemented. Their price is open. The degree of openness of customers to advertising at Netflix is likely to depend heavily on how big the price difference is compared to the standard tier.
Incidentally, Disney+ is also planning an advertising-financed tariff level. It is scheduled to start in 2023. How do you judge the development? Prefer to pay full price? Or do you endure advertising if you can save costs by doing so?