Netflix Ads is born – the experience offered by the most famous streaming platform Netflix will be changing shortly and it seems inevitable.
Co-CEO Ted Sarandos confirmed that advertisement-supported would be added to the streaming platform for subscribers who are willing to watch ads for a lower monthly rate.
Netflix is undoubtedly one of the biggest companies in entertainment media. Last year the California-based company spent $17 billion on production deals. And currently has a little over 220 million monthly paid subscribers.
Since the company was established back in 2007, leaders have been set against ads. The point of Netflix was uninterrupted entertainment on demand. It was the most significant differentiator and main draw that customers flocked to.
All of this comes after the company announced that it has lost more than 200,000 subscribers during the first quarter of 2022. This resulted in the layoff of more than 300 employees, which has a total global staff of around 11.000 people.
Netflix indicated more rounds of layoffs would be coming this year following that first group, as the company tries to adjust to its weakened stock price. The platform has lost around 70% of its value since it announced it was down by 200,000 subscribers at the end of Q1 and is expected to lose another 2 million subs in Q2.
In its most recent earnings, Netflix committed to cutting costs to keep its margins at 20%.
What is Netflix’s goal with this change?
Netflix wants to try out what its competitors in the streaming market have been doing for a while and successfully profit from having cheaper subscription options that include ads for customers that don’t mind them.
There is a huge untapped segment of potential customers that Netflix wants to get into and utilize as much as possible. The platform looks to win back subscribers who have been priced out by the increases in the monthly cost of subscriptions, and attract people who’ve yet to give Netflix a chance.
Netflix plans on introducing an ad-supported subscription tier for customers who would be willing to pay a lower monthly price at the expense of ad-free viewing. It will be completely optional, and ads won’t start appearing on already existing subscribers’ Netflix accounts. In a high likelihood, it will be similar to HBO Max’s ad-supported subscription which was introduced last year, or Disney Plus which is introducing one at the end of this year.
Netflix CEOs have seen firsthand that this concept is working successfully with Hulu being the best example. There will be a need for readjustments but if done properly it will be surely beneficial for the company.
It’s not yet completely clear how much would an ad-based subscription plan cost but the other platforms might give a hint of the price approach.
When to expect the new service to be available on the platform?
Netflix bosses haven’t offered up any further details about when this ad-supported tier will hit Netflix, but co-CEO Reed Hastings has suggested that a year-end arrival is a big possibility. Either way, it’s probably sooner than we expect if they have decided to move forward with the announcement and we can expect further advertising and news.
Where will the advertisements show up?
There is also the important question of where will they be placing the ads. Will they start before the show, at the end, or in the middle of a show stream? Most of the shows we’re never created with advertising in mind so they will have to adapt for this new addition to the platform.
In its bid to make more cash, Netflix is also looking to crack down on users who share their passwords with their friends and family members. They are already testing it in countries like Chile and Peru where users have to pay an additional “fee” for sharing their passwords with other people.
Even with the subscriber loss, which led to a shrinkage in the company’s shares, Netflix remains by far the most popular streaming service in the world with more than 222 million subscribers. It is reported that they are shared with an estimate of 100 million other households that are not actively paying for the service.
What does this mean for advertisers?
One of the biggest benefits is that it will offer companies a more predictable income and higher customer loyalty and awareness.
Streaming services are embracing ads due to changing behaviors of the consumers. This includes subscription fatigue and increased interest in free or cheaper ad-supported alternatives.
This is great timing for marketers who have had to contend with increasing competition for consumers’ interest on and off the screen. Since video streaming has proven to be more than a fleeting trend, marketers are no longer looking at it as a niche but as a direct competitor of traditional TV which has been on a steep decline for years.
Netflix offers an amazing opportunity for brands to leverage a new channel to connect with a highly-engaged audience that is often inaccessible on traditional television.
What does it mean for the customers?
Netflix’s decision to embrace ads is mainly motivated by a desire to improve the company’s finance and stocks. Still, the move would also offer greater choice to customers who would prefer to pay less for the platform in return for an ad-included viewing experience.
If Netflix can deliver ads that are relevant to the program or film they are shown it won’t be too annoying for the customers.
Netflix has the power to leverage its resources and do the advertisement right so it can be an enjoyable experience worth the investment.
