With an unexpectedly sharp drop in subscribers, streaming giant Netflix is considering changes in its subscription plans, majorly looking to minimize password sharing, and create a low-cost single-subscription instead. Reports suggest that it will take help from advertising, just like its rival streaming platform Hulu. Netflix majorly saw a boom in its subscribers in the year 2020, when it added 36 million subscribers. However, this year, its subscriber base fell by 200,000 subscribers during the January-March quarter, the first contraction the streaming service has seen since it became available throughout most of the world other than China six years ago, reported news agency AP.
Netflix is looking to improve its number of subscribers by expanding a trial program it has been running in three Latin American countries Chile, Costa Rica, and Peru. In these locations, subscribers can extend service to another household for a discounted price. In Costa Rica, for instance, Netflix plan prices range from $9 to $15 a month, but subscribers can openly share their service with another household for $3.
Another reason for a plunge in Netflix's subscribers is its decision to withdraw from Russia to protest the war against Ukraine, resulting in a loss of 700,000 subscribers. Meanwhile, Apple and Walt Disney have begun to chip away at their vast audience with their own streaming services.
Netflix projected a loss of another 2 million subscribers in the current April-June quarter. The erosion, coming off a year of progressively slower growth, has rattled Netflix investors. Shares plunged by more than 25% in extended trading after Netflix revealed its disappointing performance.
If the stock drop extends into Wednesday's regular trading session, Netflix shares will have lost more than half of their value so far this year wiping out about $150 billion in shareholder wealth in less than four months.
In the most recent quarter, Netflix lost 640,000 subscribers in the US and Canada, prompting management to point out that most of its future growth will come in international markets. Netflix ended March with 74.6 million subscribers in the US and Canada.
Netflix offered no additional information about how a cheaper ad-supported service tier would work or how much it would cost. Another rival, Hulu, has long offered an ad-supported tier. While Netflix clearly believes these changes will help it build upon its current 221.6 million worldwide subscribers, the moves also risk alienating customers to the point they cancel.
(With AP Inputs)
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