Netflix loses 200,000 subscribers, might consider advertisement
Is Netflix facing its toughest unscripted challenge yet?
Netflix's share price crashed on Tuesday after losing subscribers for the first time in 10 years, with forecasts expecting it to lose even more in the upcoming months.
Following the news that it had lost 200,000 subscribers at the start of the year, the streaming giant's price shares dropped by 20%. The number is expected to grow, with fears of losing 2 million subscribers in the current quarter, as opposed to Wall Street projections of the company adding 2.5 million subscribers.
To deal with their dire situation, the company's executives are now considering what everyone thought would have been impossible months ago: Open the service for advertisement in return for a lower-priced subscription.
It is well-known that Reed Hasings, Netflix co-founder and chairman, has always been opposed to allowing commercials and other forms of promotions to become part of the service, thus the announcement by the company's executives sent shockwaves throughout the streaming industry.
It is crucial to understand Netflix's historical role in disrupting the classic cable tv industry: When Netflix rolled out its services in 2009 it set an unprecedented subscription model that allowed clients a comfortable viewing experience, uninterrupted by ads.
Yet with the current financial climate, the company might be forced to adopt a different financial model.
In a note to investors, Netflix said: "Our relatively high household penetration – when including the large number of households sharing accounts – combined with competition, is creating revenue growth headwinds."
Recently, Netflix announced a major crackdown in Costa Rica, Chile and Peru on subscribers sharing their streaming accounts with other households, with the company expected to expand on it.
The company behind international hits such as Bridgerton, The Witcher, La Casa de Papel, and Stranger Things was also dealt a major blow over its decision to suspend its services in Russia, costing it a massive loss of 700,000 projected subscribers.
Netflix admitted to this in its note: "The suspension of our service in Russia and winding-down of all Russian paid memberships resulted in a -0.7m impact on paid net adds."
Other influential factors include slow economic growth, soaring inflation, the impact of the Ukraine war, and the ongoing disruption caused by the pandemic.