For the first time in 10 years, the streaming service titan has seen a substantial decrease in subscribers… Will incorporating ads only add to Netflix’s misery?
Last week it was revealed that Netflix was planning to include advertising material in its content in a bid to lower subscription costs.
The news followed the announcement that the streaming giant had lost 200,000 subscribers in the last quarter.
In a letter to its shareholders, Netflix put the plunge in subs largely down to the ineffective monetisation of households sharing accounts and the rise in streaming service competition with the likes of Disney Plus, Amazon Prime and Hulu successfully launching platforms over the last few years.
According to The Hollywood Reporter, co-CEO Reed Hastings said in an earnings call that the company was planning to analyse the ways in which they could make subscription plans cheaper “over the next year or two”.
“It is pretty clear that it is working for Hulu, Disney is doing it, HBO did it. We don’t have any doubt that it works,” Hastings said.
“Allowing consumers who would like to have a lower price, and are advertising-tolerant, get what they want, makes a lot of sense.”
The announcement that Netflix plans to end an era of ad-less content has received a mixed reception from members of the public and advertising industry professionals alike.
While marketers have claimed that there is great potential in advertising via the streaming platform, Netflix customers have largely threatened to cancel their subscriptions if the plans go ahead.
Marketing Beat takes a look at the differing opinions from across the globe.
READ MORE: Netflix plans to include ads to lower subscription costs
Industry reactions
According to The Wall Street Journal, the advertising industry has welcomed Netflix’s decision to offer a lower-priced ad-supported version of its service with open arms.
It has been widely considered that the move will allow marketers to reach younger viewers who no longer have an interest in watching “traditional” television, with millennials and generation Zs opting to stream their entertainment.
Starcom strategy director and media context expert, Dan Coleman, had this to say about the marketing opportunity:
“I think it is an exciting concept. Clients are just as interested as we are. On a basic level, just in terms of spot advertising, it will help re-connect businesses with audiences who are increasingly hard to reach through linear TV.”
“It could also be beneficial in helping advertisers overcome the problems we might expect with late peak availability should the “HFSS adverts before nine pm” ban come in as expected next year. I am also really excited about the idea of working on commercial partnerships on such an innovative interactive platform with access to so much creative talent.”
Other industry professionals admitted that the introduction of advertisements for Netflix was only a matter of time.
WPP senior project manager Christopher Belgrave added:
“I have worked more with ad technology than I have with streaming services, but in my honest opinion Netflix showing ads was bound to happen at some point eventually. Their offering isn’t as good as it used to be and it seems many people are considering ditching their subscriptions with the platform due to the lack of good content on there.”
While the move to implement ads serves as a last-ditch attempt to save Netflix’s hopes of remaining relevant, it also presents brands and creative agencies with an opportunity to reach even wider audiences.
Marketers will be battling it out to land advertising spots on a platform that currently boasts 222 million paid subscribers worldwide.
The Trade Desk EMEA director of partnerships, Patrick Morrell, told The Drum that he believes the move “would mark the biggest disruption to the European TV market since the arrival of Sky” and that it would be the “envy of other broadcasters”.
Perhaps TV marketing would become far less prevalent and lose outreach should Netflix’s advertisement plans go ahead.
Global keynote marketing speaker, Samuel Scott, told Marketing Beat that Netflix would boost its growth if it prioritised acquiring the rights to “hugely” popular shows, rather than continuing to create original “risky and expensive” productions.
Scott suggested that should TV production companies not sell distribution rights, Netflix should definitely consider advertising to maximise its revenue.
“Netflix and its shareholders should understand that their historical growth rates are not coming back,” he said.
“Netflix’s rapid growth, coupled with low fees and a lack of advertising, was only sustainable because the company had taken on billions in debt. It is the entertainment world’s version of the high-tech startup world: growth at all costs, revenue is more important than profit. This is unsustainable.”
“The company need to find a way to maximise its revenue per user and eventually find a way to actual profitability. Advertising might be one part of the solution, but people will tolerate advertising only if they like the product: the programs. Another part of the solution might be a much more expensive ad-free tier, but that makes the product even more important.”
“In the end, the question becomes one of product (what will Netflix have on its platform) and promotion (how does Netflix gain and keep users). Netflix will need to think a lot about these two issues.”
READ MORE: Netflix says over 100 million homes are sharing passwords
Public reactions
Despite the positive feedback from the marketing industry on the decision, many Netflix subscribers and members of the public have voiced their distaste towards the announcement.
A plethora of people chose to air their disapproval on Twitter.
One user exclaimed: “Dear @netflix The minute you implement ads and disallow multiple devices, I’ll cancel my account. I’m not the only one who’s lost patience with you…and you really can’t afford to lose more subscribers.”
Dear @netflix
The minute you implement ads and disallow multiple devices, I’ll cancel my account. I’m not the only one who’s lost patience with you…and you really can’t afford to lose more subscribers.— Mom de Plume/Denise Wilson (@DeniseW1031) April 22, 2022
Others chose a light-hearted approach, opting to joke about the situation: “Don’t worry, Netflix will cancel its ads after two seasons, like everything else.”
Don’t worry, Netflix will cancel its ads after two seasons, like everything else.
— Joseph Clark, biological Ohioan (@clarkjosephf) April 22, 2022
It seems the news is also penetrating meme culture, with @TheeMockingjqy captioning a comedic photo with: “Netflix increases the prices, restricts people from sharing passwords, releases mid content, makes back to back sequels to Red Notice and expects people to stay subscribed.”
Netflix increases the prices, restricts people from sharing passwords, releases mid content, makes back to back sequels to Red Notice and expects people to stay subscribed pic.twitter.com/MKpBHbWGSH
— Rhino (@TheeMockingjqy) April 19, 2022
In spite of these highly negative responses, some loyal viewers may find reassurance in co-CEO Hastings’ words.
“Those who have followed Netflix know that I have been against the complexity of advertising, and a big fan of the simplicity of subscription.”
The co-CEO also claimed that when the streaming service do unveil an “ad-backed tier”, it would do so a publisher, meaning the company would not track data or partake in ad-matching.
“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.”
“We can stay out of that, and really be focused on our members, creating that great experience.”
Ultimately, only time will tell if the advertising venture for Netflix will work and boost the streaming service’s subscribers.
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