The world's largest on-demand video streaming service said Tuesday that it plans to offer cheaper tiers to consumers over the next year or two, as it looks to boost its subscriber base.
Reed Hastings, the company's co-chief executive, said on the earnings call that the company will introduce ad-supported plans to give customers more choice.
The upcoming ad-supported plans will mark a major shift in how the company has viewed advertisements in the past.
Over the years, it has been asked if it would ever bring ads to its platform, an idea it has always shot down. Hastings said at the conference that the company was not well suited to compete with the likes of Facebook and Google on ads.
Hastings said that the ad model has matured enough to be successful for rivals such as Disney.
Disney has an ad-supported tier on several of its services, including Hotstar. The company said last month that it will launch an ad-supported Disney+ plan in the US later this year.
Hastings said that he has been against the complexity of advertising and a big fan of the simplicity of subscription.
He said that allowing consumers who would like to have lower price and are advertising tolerant makes a lot of sense.
He said that customers who don't want to see ads will still be offered ads-free plans.
In terms of the profit potential, the online ad market has advanced and now you don't have to include all the information about people that you used to. He said that we can be a great publisher if we have other people do all the fancy ad-matching and integrate all the data about people.
The move to adopt advertisement, which many analysts have long argued that, should have been explored earlier by the company, follows its aggressive experimentation with pricing in many markets, including India and Indonesia.
In December of last year, individuals in India can subscribe to the most affordable monthly pricing tier to date, where they can get as low as ₹199. A year ago, the company offered a free mobile plan. The company said it is seeing nice growth in a variety of markets.
On Tuesday, the company reported its first subscriber loss in more than a decade and said it expects to lose 2 million more subscribers in the current quarter. In extended trading, the company's shares fell as much as 27%.
The company's revenue grew 10%, but fell short of expectations. The company acknowledged that its revenue growth had slowed.
It said in a statement that revenue growth is being hampered by the high household penetration and large number of households sharing accounts.
A number of factors were blamed for the decline in subscriber base. The slowdown is a sign of saturation in the major markets. The company noted that more than 100 million people watch the service by borrowing credentials from others.
The company said on its earnings call that it is an attractive audience to convert into subscribers because of the large base of users who don't pay.
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