It is a discussion that is gaining momentum. Netflix will probably introduce advertising subscriptions soon – at least CEO Reed Hastings is thinking about it. But the “ad game” is not only ancient – it is also turning Netflix more and more into a TV station. A comment by Anna Schmid
“There will be no advertising on Netflix – period,” promised co-CEO Reed Hastings a few years ago. It sounded like a motto, a self-commitment, a fixed concept that the company would not shake. But now the supposed streaming mantra is in pieces.
The reason: Netflix lost around 200,000 subscribers in the first quarter of 2022. User churn is so great that the company is considering new revenue streams. As the “New York Times” reports, the streaming top dog wants to introduce a cheaper, advertising-supported subscription model in the last quarter of this year.
What Netflix is planning is not only spicy because of the no-advertisement promise. But also because streaming services have long been considered an alternative to regular TV. Viewers were free to choose the program and didn’t have to put up with any advertising. That seems to be over soon, at least for those who want to stream a little cheaper.
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It is still unclear when and how exactly the advertising offer should start. But industry experts are alarmed. “It’s scary when the only way to reignite your growth is by offering cheaper products that degrade the user experience,” said Rich Greenfield, an analyst at Lightshed Partners, of the “Financial Times”.
He deliberately refers not only to Netflix. Because other platforms also want to experiment with advertising subscription models, for example DisneyPlus. Users who opt for the cheaper streaming version get four minutes of advertising for every piece of content that lasts an hour or less. This is according to a report by “Variety”. The new subscription option should be available at the end of 2022.
Streaming services such as HBO Max, NBC Universal’s Peacock, or Paramount Plus, on the other hand, have long been offering advertising-supported subscription models. With Freevee, Amazon has even created a platform that is completely free of charge. Users pay with lifetime by watching webespots.
Netflix’s “revolutionary” idea is 80 years old
Streaming services that introduce advertising subscription models are becoming more and more like “dying linear television,” says analyst Greenfield. After all, they fall back on a classic TV element: TV advertising has been around since 1941 and has established itself as an integral part of the TV landscape over the years.
“You have to laugh when Mr. Hastings tells investors that he wants to study the advertising business, which has been part of TV for more than 80 years, and come to a decision in a year or two,” commented the “Wall Street Journal”. So what Netflix and other platforms are launching right now is anything but revolutionary – even if they like to sell it that way.
Incidentally, the fact that the streaming top dog in particular is getting closer and closer to classic TV can also be seen elsewhere: It recently became known that Netflix is working on comedy formats that are to be broadcast like linear television. Advertising plus live streams – the TV transformation has begun.
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“Streaming thrives on the fact that users can enjoy their favorite series, films and shows without interruption,” says Marcus Kleiner from the SRH Berlin University of Applied Sciences. For him, a broad introduction of advertising subscription models would come close to the “death of streaming”. Nobody wants to “watch commercials every few minutes like on private television,” said the media scientist recently in an interview with CHIP.
However, many advertisers should like the new, potential subscription models on Netflix. Brian Wieser, President of Business Intelligence at Group M, told the Financial Times: “They are very interested in […] to reach new audiences that were previously difficult to reach.”
It is unclear whether Netflix’s user numbers will increase again. But there are optimistic forecasts – for example that of the US financial services provider Wells Fargo. As a result, Netflix’s advertising efforts will pay off, albeit over time.
“One of the most important decisions Netflix will have to make in the coming months is what its ad load will be,” the industry insider said. Who wants to invest in a cheaper subscription if you’re being bombarded with ads? Although many users do not know it differently from television.
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