If You Use Netflix, Prepare for These Major Changes

Netflix has hit some stumbling blocks recently.

For years, it appeared as though almost all news was good news for Netflix, from the skyrocketing membership numbers brought on by the COVID-19 pandemic to its growing pile of major Hollywood awards for its original content. But 2022 has seen the company stumble to keep pace with its once impressive growth in the face of increased competition in the streaming market.

In April, Netflix announced that it had lost 200,000 subscribers in the first quarter of the year—marking the first time that has happened in a decade—and said that it expected to lose two million more in the next quarter, CNN reported. Initially, the company had estimated it would add 2.5 million new subscribers during that period. As a result of the devastating performance news, the streaming platform's stock dropped 35 percent and devalued the company by roughly $50 billion.

But now, the company says it will be making major changes to the streaming platform.

But Netflix isn't taking the news of its shifting subscriber base lying down. In a company memo sent to employees, the company's executives said they planned to bring commercials to the streaming service with the addition of an ad-supported subscription tier, The New York Times first reported. The note specifies that the company is aiming to offer the new viewing option by this year's last quarter.

News of the new tier comes nearly a month after Netflix CEO Reed Hastings announced the company was exploring the idea of breaking with its long-standing policy of keeping commercials out of the streaming platform's content. Initially, the executive had laid out a timeline of "over the next year or two" for finally bringing ads to the service.

"Those who have followed Netflix know that I've been against the complexity of advertising and a big fan of the simplicity of subscription. But as much as I'm a fan of that, I'm a bigger fan of consumer choice," Hastings said during the company's post-earnings call in April. "And allowing consumers who like to have a lower price, and are advertising tolerant, get what they want makes a lot of sense."

How you access Netflix could also change by the end of the year.

Besides adding a new choice for subscribers, the memo outlined another major shift planned by the company. Netflix says it will also begin to crack down on password sharing among its users when it rolls out the new ad-supported tier, per The Times. The news comes after the company announced it was testing the use of a $3 charge for subscribers in Costa Rica, Peru, and Chile to allow other households access to the streaming service.

“So if you’ve got a sister, let’s say, that’s living in a different city—you want to share Netflix with her, that’s great,” Netflix Chief Operating Officer Greg Peters said on the company’s earnings calling March. “We’re not trying to shut down that sharing, but we’re going to ask you to pay a bit more to be able to share with her.”

Other major streaming services have introduced similar subscription tiers.

Netflix is far from the only company to shuffle its subscriber offerings or dabble in ads. Last month, Hastings pointed out that the strategy was "working for Hulu. Disney's doing it; HBO did it. I don't think we have a lot of doubt that it works," per Ars Technica. He also added that the new option "would be a plan layer like it is at Hulu, so if you still want the ad-free option, you'll be able to have that as a consumer. And if you'd rather pay a lower price and you're ad-tolerant, we're going to cater to you also."

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