Home / Industry / Media /  Netflix may introduce lower-priced ad-supported plans, marking big shift

Netflix Inc. plans to create a lower-priced version of its service that has advertising, a big change for the company after years of only offering its movies and TV shows commercial free.

Co-Chief Executive Officer Reed Hastings brought up the potential for advertising on a call Tuesday with investors, after Netflix posted a loss of 200,000 customers in the first quarter -- the first such decline in a decade -- and forecast a further drop of 2 million this quarter.

The lagging subscriber growth prompted Netflix for the first time to say it might offer lower-priced version of the service with advertising.

Netflix built its streaming business into an online juggernaut with almost 222 million customers globally. But subscriber growth has come to a halt, and revenue in the latest quarter, up 9.8% to $7.87 billion, missed Wall Street forecasts. Netflix also estimates there are more than 100 million people viewing the service without paying for it.

The company offered a gloomy prediction for the spring quarter, forecasting it would lose 2 million subscribers, despite the return of such hotly anticipated series as "Stranger Things" and "Ozark" and the debut of the film "The Grey Man," starring Chris Evans and Ryan Gosling. Wall Street targeted 227 million for the second quarter, according to Refinitiv data.

In addition to advertising-supported plans, the company is also looking to generate additional revenue from customers who share their account with friends or family outside their home.

“Those who have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription," Hastings said on the call. “I’m a bigger fan of consumer choice, and allowing consumers who would like to have a lower price and are advertising tolerant to get what they want, makes a lot of sense."

The company will work on creating an ad-supported version of the service over the next year or two, Hastings said.

Shares of Netflix fell as much as 27% to $256 in extended trading after the streaming leader reported financial results that fell short of forecasts and said it expects a second straight quarter of customer losses.

Streaming services are not the only form of entertainment vying for consumers' time. The latest Digital Media Trends survey from Deloitte, released in late March, revealed that Generation Z, those consumers ages 14 to 25, spend more time playing games than watching movies or television series at home, or even listening to music.

The majority of Gen Z and Millennial consumers polled said they spend more time watching user-created videos like those on TikTok and YouTube than watching films or shows on a streaming service.

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