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Netflix reported a loss of 200,000 subscribers globally compared to Q4 2021

Netflix lost 200K subs last quarter and expects to lose millions more. Now ads could be its saving grace.

Binged “Anatomy of a Scandal”… Netflix knows we can devour a limited series as if we had unlimited time. The streaming leader revealed yesterday that it lost 200K subscribers last quarter (it was expected to add 2.5M). Even worse: it expects to lose 2M global subs this quarter. Flix shares plunged 25% after hours and are down over 40% this year.

Old plot: Netflix saw explosive growth in 2020 as Emily in sweats binged “Emily in Paris.”
Current plot: The pandemic boom led to subscription saturation (#subscripturation) and slowing growth. Netflix added 18M paid subs last year, versus 37M in 2020. Now it’s losing subs.
New plot: To spur growth, Netflix has expanded beyond content. Last year it launched a show-themed merch shop (think: “Ultimatum” tees) and five in-app games. It’s also expanded into “experiences” like a “Stranger Things” Upside Down world in NYC.

Netflix’s ultimatum… Unlike Hulu, HBO Max, and other ad-supported streamers, Netflix has rejected commercials, relying instead on subscription $$. In 2019, CEO Reed Hastings said he’d never do ads, “period.” But high prices (#flation) + subscription overload (#subscripuration) have made it harder for consumers to afford multiple streamers. Fast-forward to now:

  1. Netflix CFO Spencer Neumann recently cracked the door open to ads, saying “never say never” to an ad-supported tier.
  2. Even Disney+ is launching a lower-priced ad tier to hit its subscription goals.

It’s the price-cutting paradox… Lowering prices can boost revenue — but only if customers who were paying “premium” prices don’t downgrade. Netflix’s $15.50/month standard plan may be out of reach for many budget-conscious households, so adding a cheaper plan supported by commercials could help it grab a new market. The risk: subscribers who are paying for pricier ad-free plans might downgrade (that hasn’t happened to HBO Max yet). As streaming competition intensifies, it may be worth the risk for the Flix.

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