Netflix plans to offer a cheaper, ad-supported tier to consumers within a year or two, the world’s largest on-demand video streaming service said Tuesday, as it pushes to tap a wider set of potential customers amid stiffer competition from rival firms.
The firm, which reported a loss of 200,000 subscribers in the first quarter, will introduce the ad-supported plan to give customers more choice, company’s co-chief executive Reed Hastings said on the earnings call.
The upcoming ad-supported plan marks a major shift in how Netflix has previously viewed advertisement in its 25-year history. Hastings acknowledged the sea change, saying the model has matured enough and proven successful for rivals such as Hulu and Disney. “We don’t have any doubt that it works,” he said.
Disney has long offered an ad-supported tier on several of its services, including its Asia-focused streamer Hotstar. The company said last month that it plans to launch an ad-supported Disney+ plan in the U.S. later this year.
“Those who have followed Netflix know that I have been against the complexity of advertising and a big fan of the simplicity of subscription,” Hastings said. “But I am a bigger fan of consumer choice. Allowing consumers who would like to have lower price and are advertising tolerant get what they want makes a lot of sense.”
Netflix, which reported its first subscriber loss in more than a decade and said it expects to lose two million global subscribers in the current quarter, is not viewing an ad-supported model as a “short-term fix,” Hastings said.
“In terms of the profit potential, definitely the online ad market has advanced and now you don’t have to incorporate all the information about people that you used to. So we can be a great publisher and have other [companies] do all the fancy ad-matching and integrate all the data about people. So we can stay out of that,” he said.
Customers who don’t wish to see ads will continue to be offered ads-free plans, he said.
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