Netflix plans lower-priced service with ads, marking big shift

NETFLIX plans to create a lower-priced version of its service that has advertising, a big change for the company after years of only offering its movies and TV shows commercial free.

Co-chief executive officer Reed Hastings brought up the potential for advertising on a call Tuesday (Apr 20) with investors, after Netflix posted a loss of 200,000 customers in the first quarter - the first such decline in a decade - and forecast a further drop of 2 million this quarter.

Netflix built its streaming business into an online juggernaut with almost 222 million customers globally. But subscriber growth has come to a halt, and revenue in the latest quarter, up 9.8 per cent to US$7.9 billion, missed Wall Street forecasts. Netflix also estimates there are more than 100 million people viewing the service without paying for it.

"Those who have followed Netflix know that I've been against the complexity of advertising and a big fan of the simplicity of subscription," Hastings said on the call. "I'm a bigger fan of consumer choice, and allowing consumers who would like to have a lower price and are advertising tolerant to get what they want, makes a lot of sense."

The company will work on creating an ad-supported version of the service over the next year or 2, Hastings said.

Shares of Netflix fell as much as 27 per cent to US$256 in extended trading after the streaming leader reported financial results that fell short of forecasts and said it expects a second straight quarter of customer losses. BLOOMBERG