Netflix is planning to introduce ads for the first time in its 25 years history due to revenue growth headwinds emanating from loss of subscribers. The film streaming company said Tuesday it will offer ad-supported tiers to consumers over the next two years.

Competition in the streaming industry has gone intense recently with more players like the DStv joining the on-demand video streaming services. With subscription-based streaming as only its source of revenue, Netflix has been hardly hit by global economic headwinds buoyed by Russian-Ukraine conflict.

Netflix recorded a loss of 200,000 subscribers in the first quarter, its first in a decade. The company’s co-chief executive Reed Hastings said on the earnings call that it will introduce the ad-supported plans to give customers more choice.

Per TechCrunch, the company blamed a number of factors for the decline in its subscriber base. It said the slowdown is a sign of saturation in its major markets. It also acknowledged the growing competition from rivals such as Disney, Paramount and Warner Bros. The company also noted that more than 100 million users watch Netflix by borrowing credentials from others.

Password sharing has since last year been a big concern to Netflix, who once threatened to halt the practice. But now it is exploring other options to address the concern as it faces one of the most challenging times in its history. The company, while acknowledging that its revenue growth had “slowed considerably,” said it needs to convert subscribers who don’t pay.

“Our relatively high household penetration — when including the large number of households sharing accounts — combined with competition, is creating revenue growth headwinds,” it said in a statement earlier Tuesday. On its earnings call, the company said this large base of users who don’t pay for the service currently is an attractive audience to convince into converting into subscribers or having their friends and family pay more.

However, the plan to venture into ads marks a significant shift in Netflix’s business model, given the company’s earlier stance on advertisement. The company has over the years frowned at the idea of selling ads to its roughly 222 million subscribers. TechCrunch quoted Hastings from a 2017conference saying that Netflix was not well suited to compete with the likes of Facebook and Google on ads.

A shift to the ad playbook has become a viable option owing to the changes in market activities since the past five years. Netflix has tried to woo subscribers across its markets including India, Indonesia and Kenya and boost revenue by lowering subscription fees.

Per TechCrunch, Netflix introduced its most affordable monthly pricing tier to date in India in December, where individuals can subscribe to Netflix for as low as 199 rupees ($2.6). The company last year offered a free mobile plan in Kenya. Though the company said it is “seeing nice growth” in a variety of markets including India, and has recorded 10% to $7.8 billion revenue growth, which falls short of Wall Street expectations of $7.9 billion, its recent loss paints a gloomy future if it maintains its belief on ads.

Netflix said it expects to lose 2 million more global subscribers in the current quarter. The company’s shares fell as much as 27% to $256 in extended trading.

Analysts have long argued that Netflix should explore and adopt advertisements besides its aggressive marketing. Hastings said, citing the success of rivals Hulu and Disney, that the ad model has matured enough and proven successful. “We don’t have any doubt that it works,” he said.

The plan will mean creating an ad-free streaming for consumers who don’t want ads, and offering incentivized subscription bouquets for subscribers who accept ads.

Per TechCrunch, Disney has long offered an ad-supported tier on several of its services, including its Asia-focused streamer Hotstar. The company said last month that it plans to launch an ad-supported Disney+ plan in the U.S. later this year.

“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. “But as much as I’m a fan of that, I’m a bigger fan of consumer choice,” he said.

“Allowing consumers who would like to have lower price and are advertising tolerant get what they want makes a lot of sense,” he said, adding that the company is not viewing the ad-supported model as a “short-term fix.”

Customers who don’t wish to see ads will continue to be offered ads-free plans, he said.

“In terms of the profit potential, definitely, the online ad market has advanced and now you don’t have to incorporate all the information about people that you used to. So we can be a great publisher and have other people do all the fancy ad-matching and integrate all the data about people … so we can stay out of that,” he said.

I wrote here: “under my plan, Innoson Motors can partner with The Polytechnic Nekede to train those 1,000 young people. …Magically, you have created an incentive for Innoson to partner with Poly Nekede, and the school will then have the resources it needs.”

In pure coincidence, we’re reading that Innoson Motors and The Polytechnic Nekede have signed an MOU to work together: “It was a ceremony of innovation and excellence as Rector of the Federal Polytechnic Nekede, Engr. Dr Michael C. Arimanwa FNSE, last Friday in Owerri, led his Management team to sign a historic Memorandum of Understanding (MOU) with Innoson Vehicle Manufacturing. … The MOU covers the construction of new engineering workshops, staff acquisition of Innoson vehicles and human capacity development, among others.”

Congratulations Team Nigeria – more collaborations. Even my small Institute Tekedia Institute is signing with many SMEs and startups as we continue to help them build and scale growthware – those critical tools for business growth and success. And if things go as planned, we will have one of the largest universities in East Africa in coming weeks.

It was a ceremony of innovation and excellence as Rector of the Federal Polytechnic Nekede, Engr. Dr Michael C. Arimanwa FNSE, last Friday in Owerri, led his Management team to sign a historic Memorandum of Understanding (MOU) with Innoson Vehicle Manufacturing. This is in furtherance of his policy thrust of maintaining a robust collaboration and linkage with relevant systems and institutions locally and international. The MOU covers the construction of new engineering workshops, staff acquisition of Innoson vehicles and human capacity development, among others.

While signing the MOU in Owerri on behalf of the Polytechnic last Friday, the Rector, Engr. Dr. M. C. Arimanwa, made it clear that the institution was set to produce engineering students who are highly skilled in their areas of endeavour. He specifically identified students of Mechanical, Electrical and Mechatronics Engineering as direct beneficiaries of the programme with the Innoson Group. Notably, with the signing of the Memorandum of Understanding, Innoson IVM and the Polytechnic would collaborate to build training workshops in the institution that would enable staff and students master the dynamics of manufacturing vehicle spare parts.

Speaking further, the digital Rector stated inter alia, “We are here to essentially kickstart the industry part of our training at the Polytechnic. That is why we considered it necessary to collaborate with an industry expert like Innoson. We felt it will be important to collaborate with Innoson in the area of building workshops in our school to expose our students to the raw practical knowledge of their discipline. The relationship would be mutually beneficial as we will not only train and certify their staff in the areas relevant areas of need, we shall also promote the Innoson Group using the facilities at our disposal.”

Read a part of my 3T2030 Plan for Greater Nigeria here

As Your Federal Minister, I Will Fix Nigeria’s Educational System