Photo Credit: Netflix
During the last quarter, media giant Netflix lost over a million subscribers. The loss is considered the most since the company’s inception 25 years ago. However, the company was able to mend the loss it had and is gearing for a better strategy that could boost its sales and rake in subscribers.
Netflix’s new initiative includes the lowering of ad costs as well as the heightened fight against password sharing among subscribers. Wall Street was quick to commend these efforts.
However, the promise of the ‘best overall experience’ from the company may be brushed out in the process. To compete with other streaming platforms, Netflix has to crack down on and counter several issues that prohibit the growth of their company and of their profit.
Michael Nathanson at MoffettNathanson, said, “They’re going to make it harder for people to share with their family, make it hard for people to watch in multiple locations… If you choose it, have advertising interrupt your content.”
“So the original consumer proposition, which was incredibly great value, is now flipping on its head,” the media analyst added.
Simply put, the planned strategy of Netflix is what the company needs to boost its profit, but that is not what consumers necessarily want.
No ads on Netflix? Not anymore
“We … are advertising free. That remains a deep part of our brand proposition,” Netflix said in 2019.
The statement came from a belief that it would help the company in staying out of the competition for ad revenue and that it would be best to focus more on the satisfaction of its viewers.
Just last week, Netflix said that they would be getting on board with Microsoft in the creation of its ad tier. The tier would be launched in the early parts of 2023.
Subscribers will now have to choose between plans that do not show ads and those that do not. One thing is for sure; the former is cheaper than the latter.
Vice President of media firm Magid, Zak Shaikh, said, “The concern I have over an ad-funded model is whether ad revenue can cover the loss in premium subscriber revenue, as a portion of the current subs will likely downgrade to the cheaper ad option.”
Shaikh went on to pose several questions relating to Netflix’s decision on ads. “Will ads have an impact on content standards and the supposedly ‘artist-friendly’ environment of Netflix?” Shaikh asked. “Will advertisers expect Netflix to censor certain content that right now Netflix has not had to be concerned about?”
Crackdown on Password Sharing
Ever since the number of Netflix subscribers went down, it has been a consideration by the management to crack down on password sharing. However, this could pose some damage to the company.
Netflix said that it is in the “early stages of working to monetize the [more than] 100 million households that are currently enjoying, but not directly paying for, Netflix.” To put it simply, subscribers will have to pay more should they choose to share their accounts.
“We know this will be a change for our members,” said the company. It would now be difficult on the part of subscribers who have been used to sharing their accounts with their friends, families, and acquaintances.
Netflix has been friendly to password sharing. Not until the recent drop in their revenue and subscribers. With the company’s existence on the line, it needs subscribers to pay, if only to keep operations up and running.
“What I worry about is that the goodwill that they’ve built over the years … dissipates over time when they do things that should be more consumer-unfriendly,” a media analyst said. “All the incredible value and goodwill that they built is at risk of being jeopardized.”