Netflix lost one million paid subscribers in the second quarter, to introduce ad level

Average revenue per subscription (ARM) in the APAC (Asia and Pacific) region fell 2% year-on-year in the last December due to a drop in prices in India. Netflix cut rates by 18-60% across all plans in India to woo more viewers and increase penetration.

The company also said that it would launch a low-cost plan in early 2023 that would allow advertising that would complement its existing plans. There are also plans to monetize the over 100 million households who are consuming but not directly paying for the service.

“We added 1.1 million paid subscriptions in the (APAC) region (versus 10 million last quarter). ARM in APAC was -2% year-over-year, driven by the impact of our price reduction in India last December as well as plan mix, which was partially offset by higher ARMs in Korea and Australia. Excluding India, APAC ARM grew 4% year-on-year on constant currency basis,” the company said in a letter to shareholders.

Over the past two quarters, the Reed Hastings-owned platform has attributed its slow revenue growth to connected TV adoption, account sharing, competition and macro factors such as sluggish economic growth and the impact of the war in Ukraine.

Overall, the service which projected 1 million paid net additions worldwide for Q3 versus 4.4 million in the year-ago quarter, said it expects the higher impact of the unprecedented appreciation in the US dollar as its About 60% of revenue comes from outside the US and swings have a large inflow through operating profit in foreign currency because most of its expenses are in US dollars and a strong greenback does not benefit.

Chief Financial Officer Spence Newman said the company expects to spend about $17 billion on materials this year. The fourth season of its science fiction horror drama strange things Which generated 1.3 billion viewing hours within its first four weeks this quarter, making it the platform’s most-watched English TV show to date, with co-CEO Reed Hastings singing it during an earnings call Is.

Netflix’s chief operating officer and chief product officer Greg Peters said the company is getting a pretty strong response (for its ad-supported tier) from a brand and advertiser perspective, with the company aware that there is price sensitivity around consumers. .

“Some of those consumers are people who have never actually signed up for Netflix. Some of them..were members of us for a while and they decided to cancel for a variety of reasons. Some..currently watching Netflix, but using the account credentials of another paying member. They all represent opportunities for us as we are bringing a wide range of prices through an ad-supported offering, a less consumer-facing in order to be able to attract a wider set of members,” Peters said in an earnings call.

The low-priced ad-supported offering will complement Netflix’s existing plans to remain ad-free, the letter to shareholders said, adding that the platform will begin by introducing it to “a handful of markets where ad spend is significant.”

So far since its launch in Latin America, the company has been trying two methods to monetize viewers who aren’t directly paying for the service and minimize the losses caused by account sharing. “Essentially, both (the plans) are similar in that they ask consumers not to stop sharing, but to pay a little more for different forms of sharing. The first model we implemented was , had to pay a little more to add a member and share (account) with those additional members. Another model we are trying is to add an additional household and share the account with additional households a little more Have to pay,” Peters said during the call.

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