Netflix lost roughly a million customers last quarter — the most in the company’s 25-year history. But it stopped the bleeding in a nightmare year, and the company believes its new long-term initiatives will boost sales and subscribers.
Those efforts, which include crack down on password sharing Y Introducing a lower price level with ads. – were acclaimed by Wall Street. Yet they are diametrically opposed to what helped make Netflix king of streaming in the first place: its beloved consumer experience.
The streamer has never been able to compete with rivals like Disney in terms of raw content, but it built its business to give customers the best overall experience possible.
Now, Netflix is trading some of that experience so it can grow in the media business.
“They’ll make it harder for people to share with their family, they’ll make it harder for people to watch in multiple locations… If you choose, make it so that advertising disrupts your content,” Michael Nathanson, media analyst at MoffettNathanson. , he told CNN Business. “So the original consumer proposition, which had incredibly great value, is now running amok.”
These initiatives are undoubtedly good for Netflix’s bottom line, but they’re not necessarily what customers are clamoring for. That could become a problem as the company tries to attract new users, reduce churn and simultaneously make money.
Ultimately, for Netflix to succeed in the world of streaming, it may have to become less like Netflix.
“We… are free advertising. That’s still a deep part of our brand proposition.”
That’s what Netflix said in a 2019 letter to shareholders.
The company added that it believed it had “more valuable business in the long run by staying out of the competition for ad revenue” and would focus on “competing for viewer satisfaction”.
Boy, how things have changed.
Netflix announced last week that it would partner with Microsoft on building its new ad tier and said Tuesday that it expects to launch the offer “around early 2023.”
In three years, advertising on Netflix went from “never, never” to one of the pillars of the company’s future growth. This will surely be disconcerting to subscribers, who will not to have to view ads, as your existing plans will remain ad-free, but now you’ll have to choose between a cheaper ad-supported plan and a premium plan.
“The concern I have about an ad-supported model is whether ad revenue can cover the revenue loss from premium subscribers, as a portion of current subscribers will likely switch to the cheaper ad option,” Zak Shaikh, VP of research programming. the Magid-based media firm, told CNN Business.
And what an effect the ads could have on one of the most vital pillars of Netflix: content.
“Will the ads have an impact on Netflix’s supposedly ‘artist-friendly’ environment and content standards?” the sheikh said. “Will advertisers expect Netflix to censor certain content that Netflix hasn’t had to worry about right now?”
WHAT IS THE PASSWORD?
Password sharing is another area Netflix is trying to tighten up, but it could prove to be a difficult tactic.
The company said Tuesday that it is in the “early stages of work to monetize the [more than] 100 million households currently enjoying, but not paying directly for, Netflix.” Translation: You may have to pay more to share your account.
Netflix has been experimenting with possible solutions implementing two test features in Chile, Costa Rica and Peru called “Additional Member” and “Profile Transfer”.
Encouraging users to keep their children, friends, or colleagues on their accounts won’t be easy. “We know this will be a game changer for our members,” the company admitted.
Until recently, Netflix had no problem with subscribers sharing their passwords. In fact, the service said in its April letter to investors that the policy likely helped fuel its growth by “getting more people to use and enjoy Netflix.” But now the company needs those people to pay.
Will that alienate millions of consumers?
“What worries me is that the goodwill they’ve built up over the years … dissipates over time when they do things that should be more unfriendly to the consumer,” said Nathanson, the media analyst. “All the incredible courage and goodwill they built is at risk of being compromised.”