Netflix tells workers it will introduce an ad-supported, cheaper subscription plan THIS year after it lost 200,000 subscribers and its stock plunged
- Netflix last month revealed they had lost 200,000 subscribers in the first three months of the year
- As a result, co-CEO Reed Hastings said the company was looking into a cheaper, advertising-funded alternative to their main $15.49 plan
- Hastings said it would be ushered in ‘over the next year or two’, but on Tuesday it emerged the company was speeding up its plans
- The cheaper alternative will be available from the final quarter of this year, according to an internal memo
Netflix has sped up plans to introduce a cheaper, advert-subsidized plan for users who are perhaps contemplating cancelling the streaming service, as it tries to shake off a shockingly bad first quarter.
Netflix on April 19 announced it had lost 200,000 subscribers in the first three months of the year – the first time in a decade their numbers have fallen, and a dramatic reversal of their aim of adding 2.5 million.
They said they expect to lose two million more in the second quarter, and the share price fell significantly, wiping away roughly $70 billion in the company’s market capitalization.
In response, Reed Hastings, Netflix’s co-chief executive, said the company was considering introducing adverts on a cheaper subscription package, and would ‘figure it out over the next year or two.’
Yet a note to employees, obtained by The New York Times on Tuesday, showed the pace of the proposal has drastically accelerated, and the new cheaper offering will be brought in in the final quarter.
Reed Hastings, the co-chief executive of Netflix, said last month that the company was looking into bringing in an advertiser-supported cheaper streaming service within the next couple of years. The plan appears to have been dramatically sped up, and the service is now due to be unveiled at the end of this year
Netflix’s share value plummeted after the April 19 announcement of 200,000 lost subscribers
‘Yes, it’s fast and ambitious and it will require some trade-offs,’ the note said.
‘Every major streaming company excluding Apple has or has announced an ad-supported service,’ the note said.
‘For good reason, people want lower-priced options.’
The executives pointed out that HBO and Hulu have been able to ‘maintain strong brands while offering an ad-supported service.’
Netflix offers several plans to its 221.64 million subscribers – all without advertising. Its most popular scheme costs $15.49 a month, and it was unclear how much the new one would be.
HBO Max charges $15 a month for uninterrupted viewing, and $10 a month with advertising.
Netflix executives said the advertising-supported tier would be introduced ‘in tandem with our broader plans to charge for sharing.’
Netflix’s headquarters are pictured in Los Gatos, California
Netflix’s share price on Tuesday closed up 4.5 percent, but was still significantly down from before the April 19 update, when shares were at $350
Netflix is also in talks to join forces with The Trade Desk, which helps advertisers with their online campaigns, and which has former chief financial officer David Wells on their board.
They are also intending on clamping down on the sharing of accounts.
‘So if you’ve got a sister, let’s say, that’s living in a different city — you want to share Netflix with her, that’s great,’ said Greg Peters, Netflix’s chief operating officer, on the company’s earnings call.
‘We’re not trying to shut down that sharing, but we’re going to ask you to pay a bit more to be able to share with her.’
He said the changes would take ‘a year or so of iterating’ to roll out in their entirety.
Netflix stock was up around 4.5 percent on Tuesday but is yet to bounce back from last month’s rout.
The price was $348.61 at market close on April 19, fell to $226.19 on April 20, and was at $177 by Tuesday evening.