Netflix may have enjoyed a good fanfare in the last few years but it looks like its popularity is waning among people in India and globally.
The streaming platform has lost one million subscribers globally in April-June quarter compared with an addition of around 1.5 million subscribers during the same period last year.
The platform seems to have hit the panic button as it is looking to launch lower-priced plans starting next year but those plans would come with advertisements as some of its rivals are currently offering.
Netflix CEO Reed Hastings had recently said it will never have ads on its platform but now the platform is likely to roll it out in “a handful of markets where advertising spend is significant."
Not just that, the streaming giant is also looking to monetise the 100 million plus households that are consuming but not directly paying for the service.
In India, Netflix slashed rates by 18-60 per cent across plans to woo more audiences and deepen penetration. Has the move worked in its favour? It may be too early to say, but the initial numbers suggest Netflix is finding it tough to compete with its rivals such as Disney Hotstar, Amazon Prime Video, and others in the price-sensitive market.
While Netflix is looking for ways like password-sharing crackdowns, cost-cutting and ad model, to earn more money, but will these steps help the platform increase its customer base in India and other emerging markets?
Will Cheaper Plans Help Netflix Gain Subscribers?
Earlier this year, Netflix hiked the price of its plans in India, US, Canada, and a few other countries. This may have prompted some customers to cancel their subscriptions.
An ad-supported plan will definitely be cheaper for users than the current plans. This could be a win-win formula as Netflix may also gain new subscribers. In its 2022 report, Netflix said it has over 200 million subscribers, despite losing nearly 2 million in the first quarter of 2022.
According to a research firm, it has around 5.5 million subscribers in India. Its competitors (Amazon Prime and Hotstar), however, are way ahead with 22 million and 46 million subscribers respectively.
Average revenue per membership (ARM) in the Asia and Pacific region fell 2 per cent year-on-year, it said, because of “price drop in India last December.“
“We added 1.1 million paid memberships in the (APAC) region (versus 1 million last Q2). ARM in APAC was -2 per cent y-o-y (year-over-year), due to the impact from our price decrease in India last December as well as plan mix, which was partially offset by higher ARM in Korea and Australia. Excluding India, APAC ARM grew 4 per cent y-o-y on a constant currency basis," the company said in a letter to shareholders.
Netflix has attributed its slowing revenue growth to account sharing, competition, and other factors such as economic growth, etc.
Netflix is looking to stay ahead of the competition by investing more in original content. For that, it would either have to increase the subscription cost or add more paying subscribers.
Cheaper ad-supported plans can help the company maintain or even increase its subscribers and users also may not mind a few ads here and there.
Is Netflix The First Streaming App To Include Ads?
Before Netflix, several streaming platforms have introduced cheaper ad-supported plans, including, Disney Hotstar, Discovery+, among others.
The challenge for Netflix would be to keep the cost of ad-supported low to compete with other streaming platforms in India and other price-sensitive market.
What Are Pros And Cons Of Ads On A Streaming Platform?
Streaming platforms have so far given ad-free experience to users and sudden addition of ads may spoil experience for some people. This would eventually compel users to pay more for an ad-free plan or cancel subscription altogether.
Price hikes have become as it is important for it to make more original content to keep itself ahead in the race. Netflix has hiked its prices thrice since 2019 and as things stand, more price hikes are likely and ad-supported cheaper plans could be a good idea for casual users who come to the platform to watch a specific content and doesn’t want to keep paying for subscription.
Can Original Content Such As Stranger Things Save Migration Of Netflix Subscribers?
The recently-launched fourth season of Stranger Things generated 1.3 billion viewing hours within its first four weeks this quarter and it is the platform’s most viewed english TV show ever.
Netflix chief financial officer Spence Neumann said the company expects to spend about $17 billion on content this year.
The initial response the company is getting from a brand and advertiser perspective (for its ad-supported tier) is quite strong, said Greg Peters, chief operating officer and chief product officer at Netflix, adding that the company knows there’s price sensitivity around consumers.
“Some of those consumers are folks that have never actually ever signed up for Netflix. Some of them were members for us for a period of time and they decided to cancel for a variety of reasons. Some are currently watching Netflix, but they’re using another paying member’s account credentials. All of those represent opportunities for us because we’re bringing a wider range of prices through the ad-supported offering, a lower consumer facing price to be able to attract a broader set of members," Peters said in an earnings call.
