San Francisco. An unexpectedly sharp drop in Netflix subscribers has prompted the platform to consider changes it has resisted for years: minimizing user sharing of passwords and creating an affordable ad-supported service.
The changes announced Tuesday night are intended to help Netflix regain lost momentum over the past year. The quarantines associated with the pandemic that triggered audiovisual consumption have been lifted, and rivals with large budgets such as Apple and Disney began to take away part of its large audience with its own services streaming.
The customer base of Netflix fell by 200,000 subscribers in the quarter between January and March, the first recorded contraction in the six years since the service has been available in much of the world outside of China. The decline was due in part to Netflix’s decision to leave Russia in protest of the war against Ukraine, which saw it lose 700,000 subscribers. Netflix estimated that it would lose another two million subscribers in the second quarter of the year.
The decline, after a year of slowing growth, has hit another pillar of Netflix, its investors. After posting disappointing results, the company’s shares fell more than 25% in after-hours trading. If the decline continues in Wednesday trading, Netflix shares will have lost more than half their value this yearerasing some $150 billion of investor wealth in less than four months.
The Los Gatos, California-based company estimates that some 100 million households around the world access its service for free with a friends or family account, including 30 million in the United States and Canada. “That’s about 100 million households that have already decided to watch Netflix,” said the firm’s CEO, Reed Hastings. “We just have to somehow charge for them.”
To encourage more people to pay their bill, the company will expand a system it has tested in three Latin American countries: Chile, Costa Rica and Peru. At these locations, customers can extend their service to another home at a discounted price. In Costa Rica, for example, Netflix fees range from $9 to $15 a month, but subscribers can openly share an account with another household for $3.
Netflix provided no further information on how an ad-supported service would work or how much it would cost. Another competitor, Hulu, has been offering an ad-supported account for years.