It’s a page that turns in the history of Netflix, and some consumers will be forced to change their habits.
Streaming giant Netflix had a relatively complicated 2022, notably characterized by a loss of subscribers in the spring. Since then, the platform has undergone several evolutions, and one of the most important decisions in its history has just been taken. Netflix is indeed abandoning one of its emblematic services.
A meaningful decision made by Netflix
In mid-April, Netflix published a press release focusing on its results for the first quarter of 2023. The opportunity for the firm to discuss the strategies to be adopted in the future to maintain its growth. And one of them is radical: it’s about abandoning the DVD rental service, which has been in place for nearly 25 years! This will be effective from September 23, 2023. We can already see some readers laughing behind their screens, wondering who this could impact. Well no less than 16 million Americans, mind you. It is indeed the number of people who are still subscribed to this rental service which, let us remember, is done by mail! When it was set up in 1999, it was a real revolution.
It took until 2017 for Netflix to start offering VOD for online rental. Obviously, it was during the 2010s that the company experienced a huge expansion. And in its race for growth, it can no longer afford to rely on a service that no longer attracts: “Our goal has always been to provide the best service to our members, but it has become very complicated with the decrease in this activity”. In 2022, DVD rentals only earned Netflix $147 million. For comparison, the firm generated more than 8 billion dollars in the first quarter of 2023 alone. In terms of profits, this represents 1.3 billion dollars.
Subscription with advertisements is a huge success
It’s no secret that Netflix has decided to focus primarily on streaming. The company does everything to try to make the most of it. For several months, she has been working to fight against account sharing, which would be a source of major loss of income. But it has also chosen to diversify its subscription offers. For a lower cost, it is now possible to enjoy Netflix by viewing advertisements. And if this new formula has struggled to be controversial, it is proving to be very beneficial for the platform. We thus learn that “the interest for this new formula exceeds (the) expectations”.
According to market research company Insider Intelligence, Netflix could generate $770 million in advertising revenue across the Atlantic in 2023. A figure that could exceed one billion next year. A hypothesis that is all the more credible since the Essential subscription with advertisements, offered at €5.99, has just been greatly improved. The maximum video quality thus increases from 720p to 1080p, while two devices can now be used simultaneously.
