An unexpectedly sharp drop in subscribers has Netflix considering changes to its service that it has long resisted: minimizing password sharing and creating a low-cost subscription supported by advertising.
FILE- A Netflix logo is displayed on an iPhone in Philadelphia on July 17, 2017. Netflix is confronting a reckoning that will result in new barriers to prevent its video streaming service’s subscribers from sharing their passwords beyond their households and possibly inject ads into its programming line-up for the first time.
The steep erosion, which follows a year of progressively slower growth, has given Netflix investors major jitters. The company's stock was down as much as 37% midday Wednesday. If the stock closes at this level, the selloff will have wiped out nearly two-thirds of Netflix’s market value since the end of last year, erasing $170 billion in shareholder wealth in less than four months.
The Los Gatos, California, company estimated that about 100 million households worldwide are watching its service for free by using the account of a friend or another family member, including 30 million in the U.S. and Canada. Netflix offered no additional information about how a cheaper ad-supported service tier would work or how much it would cost. Another rival, Hulu, has long offered an ad-supported tier.
Tuesday’s announcement was a sobering comedown for a company that was buoyed two years ago when millions of consumers corralled at home were desperately seeking diversions — a void Netflix was happy to fill. Netflix added 36 million subscribers during 2020, by far the largest annual growth since its video streaming service’s debut in 2007.
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