Netflix's (NFLX 2.24%) stock has had a volatile 12 months. The company shed customers for the first time in over a decade, and at one point its share price was down more than 60%.

In recent months, the streamer has rallied somewhat, reporting $31.6 billion revenue for fiscal 2022 and counting just over 230 million global subscribers.

But there are signs that headwinds that have slowed growth across the streaming industry are holding firm, which raises questions about how Netflix could fare from here. With this in mind, let's explore what's happening for the company and where it might be a year from now.

Netflix slashes subscription fees

At the beginning of 2022, Netflix raised prices in the U.S. and Canada, bumping up its monthly Basic, Standard, and Premium plans by $1 to $2 apiece. The company followed suit by upping prices in some European markets months later. (On both occasions, the entry-level Basic With Ads was not yet available).

However, the streamer has recently announced a reduction in subscription fees for some markets, indicating a more responsive strategy when it comes to localized pricing.

According to Ampere Analysis, Netflix has dropped prices in more than 100 regions, including Central and South America, the Middle East, and Asia-Pacific. All told, the reductions primarily target its Basic tier, with fees dipping between 20% to almost 60%, depending on the region.

While at first that might sound like a substantial move that could significantly eat into revenue, Ampere estimates about 5% of Netflix's total global customer base will benefit from the new prices. So instead, perhaps a better read is that Netflix believes its previous pricing was out of reach for too many, and that by pulling back some fees, it can trigger new growth in less-mature markets.

Striking while the competition is on the ropes

Netflix's price adjustments come as growth in the streaming industry continues to be harder and harder to achieve. Walt Disney (NYSE: DIS) lost about 2.4 million Disney+ subscribers in its most recent quarter, which the company suggests was likely due to price increases. Notably, Disney posits those fee increases could lead to further churn in fiscal 2023 second quarter.

The prospect of a weaker Disney+ increases the likelihood that Netflix will remain the single most-popular streaming service for a while yet. (Some industry experts previously forecast that Disney+ was on course to overtake Netflix's subscriber numbers by 2025). Nonetheless, Netflix still has one particular area of weakness: its ads business.

Ad challenges remain

Netflix introduced its Basic With Ads offering in November 2022, pitching it as a lower cost of entry for those who can tolerate marketing messages. Before the launch, some analysts projected the ad-supported tier could generate as much as $2.5 billion annually. However, soon after the rollout, Netflix found itself reimbursing advertisers because it was not seeing the sign-up rates it had anticipated.

Greg Peters, chief operating officer and chief product officer, discussed the state of the ads-based tier during the company's most recent quarterly earnings call. Peters suggested Basic With Ads is seeing solid growth, but indicated the company still has "[m]ore to do in the next quarter or two," particularly with improved ad-targeting and user experience.

Despite the early challenges, Netflix clearly believes the ad-supported tier has great long-term potential. Spencer Neumann, chief financial officer, estimates Disney-controlled Hulu earns half its revenue from its ad plan: "[W]e're not going to be larger than Hulu in year one. But, hopefully, over the next several years, we can be at least as large, and we wouldn't be getting into this ... if it couldn't be a meaningful portion of our business."

A year from now

For investors looking at Netflix, the streamer certainly demonstrates confidence. Not only has the company introduced price cuts as Disney+ is losing customers, but it signaled that Hulu's ads model is a key long-term target.

Netflix is not invulnerable to shedding subscribers itself (it only has to look at its numbers from last year to be reminded), and Basic With Ads is still a nascent product. But if the streamer can drive new subscriptions in emerging markets, while also making improvements to its ad-based tier, then it's feasible it could be in an even stronger position this time next year.

For market watchers, it will be worth paying attention to Netflix's next quarterly report to see if its price cuts deliver notable regional growth, and whether refinements to Basic With Ads drive additional advertiser revenue.