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Netflix could introduce ads - here’s why

·2-min read
Netflix app close up
Hulu and Amazon Prime already have ad-supported streaming tiers, with Netflix now consdiering a similiar model. (Source: Getty)

Netflix may introduce a cheap streaming option supported by advertising revenue, according to co-CEO Reed Hastings.

Speaking to investors on an earnings call on Tuesday, Hastings said a low-cost, ad-supported service was on the cards for the streaming giant and could be launched within a year.

Despite preferring the “simplicity of subscription”, Hastings said the ad-supported offering would give consumers more to choose from.

“And allowing consumers who would like to have a lower choice and are advertising tolerant [to] get what they want makes a lot of sense.”

Hastings also nodded to the success of other streaming services that had already introduced ad-supported models, including Amazon and Hulu.

Dwindling subscribers

The news follows Netflix’s first drop-off in subscribers in a decade, triggering a 20 per cent dip in the company’s share price.

The company lost 200,000 users in the first quarter and is forecast to wave goodbye to another 2 million customers in the second quarter.

There are a few reasons for the declining subscriber numbers, including the loss of Russian subscribers after the streaming giant exited the country in response to the Ukraine invasion.

The company is also up against an increasingly saturated US market and growing competition.

The streaming-services market has become a crowded space, with customers now practiced in the art of hopping between services as attractive content becomes available.

Paying for all services has become super expensive, with numbers crunched by comparison website Finder discovering it would cost $311.53 a month to subscribe to all streaming services in Australia.

Password sharing has also become a thorn in Netflix’s side.

In some countries, the company is now charging users a penalty fee of around $4 (US$3) a month if their password is being used across multiple households.

The company said password sharing was “impacting our ability to invest in great new TV and films for our members”.

As well as tightening up on password sharing and considering advertising revenue, the company also plans to cut back spending on film and TV in response to customer losses.

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