Netflix is considering ads to keep company afloat

Netflix co-CEO Reed Hastings has finally acknowledged that in order to stay afloat and keep growing, the company will need to incorporate ads.

Though Reed has been against incorporating ads in the past, and the streaming platform is largely lauded for being ad-free, he acknowledges it is high time to take the necessary step.

Earlier in April, Netflix reported a loss of 200,000 subscribers during the first quarter and warned of deepening trouble ahead.

Netflix is forecasting a global paid subscriber loss of 2 million for the second quarter.

The last time Netflix lost subscribers was October 2011.

"Our revenue growth has slowed considerably," the company wrote in a letter to shareholders.

"Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally. However, our relatively high household penetration — when including the large number of households sharing accounts — combined with competition, is creating revenue growth headwinds," reports CNBC.

Co-CEO Reed Hastings said the company is exploring lower-priced, ad-supported tiers in a bid to bring in new subscribers after years of resisting advertisements on the platform.

The company said that the suspension of its service in Russia and the winding-down of all Russian paid memberships resulted in a loss of 700,000 subscribers. Excluding that impact, the company said it would have seen 500,000 net additions during the most recent quarter.

Netflix also cited growing competition from recent streaming launches by traditional entertainment companies, as well as rampant password sharing for the recent stall in paid subscriptions.

The company estimates that in addition to its 222 million paying households, access is being shared with more than 100 million additional households through account sharing. It warned a global crackdown could be coming.

Netflix was an earlier winner when Covid lockdowns sent families inside and searching for entertainment. But the company now says pandemic-era gains "clouded the picture" for the company and that it's seeing a downturn as people return to more normalised out-of-home activities.

While the company is exploring other options for growth, such as adding video games, analysts and investors are wondering what else Netflix can do to bolster profits.