Netflix sees ads as nose-dive

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On Tuesday, Netflix released what may be the worst earnings report in the company’s history, revealing that it lost subscribers for the first time in more than a decade, with the loss of 200,000 subscribers. in the first quarter of 2022. Just two years after the company showed unprecedented growth during the lockdown phase of the pandemic, Netflix has encountered significant “headwinds”, the company said.

“Our revenue growth has slowed significantly, as shown in our results and forecast below. Streaming is outweighing linear, as we predicted, and Netflix titles are wildly popular around the world. However , our relatively high household penetration – if you include the large number of households sharing accounts – combined with competition, creates headwinds for revenue growth,” the company said in its letter to investors.

The company also expects its losses to be even larger in the next quarter. The report was enough to send the company’s shares down double digits in after-hours trading.

In an “earnings interview” on Tuesday evening, Netflix’s co-CEOs discussed the earnings release and also hinted at something – Netflix incorporating advertising into its offerings – that was considered unthinkable. not so long ago. The company also said it would cut spending on content.

“Those who have followed Netflix know that I have been against the complexity of advertising and a big fan of subscription simplicity,” co-CEO Reed Hastings said in the interview, as transcribed by The Hollywood. Postpone. I’m a fan of that, I’m a bigger fan of consumer choice, and allowing consumers who would like a lower price and who are tolerant of advertising to get what they want makes a lot of sense.

Hastings added that adding ads is likely in “a year or two.” Several Netflix competitors offer ad-supported tiers, while others, like the popular Pluto TV, offer a completely free, ad-supported product.

Netflix CFO Spencer Neumann also spoke on the call about what Netflix plans to do with spending.

“We’re trimming some of our spend growth for both content and non-content spend,” Neumann said on the call. “We’re trying to be smart and careful in terms of reducing some of that expense growth to reflect the revenue growth realities of the business.”

Netflix attributed its lackluster performance to a variety of factors, including growing competition from other services, the company’s withdrawal from Russia, and the continued sharing of passwords, which the company is beginning to crack down on after not doing so for a while. many years.

Stephen Silver, technology editor for The National Interest, is a journalist, essayist and film critic, who also contributes to The Philadelphia Inquirer, Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and connect today. Co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.

Image: Reuters.

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