Although still number one in its market, Netflix is struggling. Indeed, the platform is losing users.
In April, during the presentation of its quarterly results, SVOD indicated that it had lost 200,000 subscribers during the first three months of 2022. And the situation should not improve in the short term, since the platform could lose 2 million subscribers.
Faced with this catastrophic situation, Netflix is in the process of making a shift. Whereas previously, company executives were strongly opposed to creating an ad-supported offering, today they are changing their minds.
Netflix loses subscribers
Reed Hastings, the CEO of Netflix, had already hinted at this change of direction in April. “Those who have followed Netflix know that I have been against the complexity of advertising and a big fan of the simplicity of subscription”he said. “But as much as I’m a fan of that, I’m a bigger fan of consumer choice, and allowing consumers who want a lower price and who are ad-tolerant to get what they want makes a lot of sense. . »
And the New York Times has already relayed a note that the company would have sent to its employees, indicating to them that this offer financed by advertising could land before the end of the year.
Moreover, this week, the development of this offer is confirmed by a company executive. In a recent article, The Hollywood Reporter relays an intervention by Ted Sandaros, the co-CEO of Netflix, at the Cannes Lions festival, an event dedicated to marketing.
During this intervention, Sandros confirmed that Netflix’s affordable offer is indeed being created. “We’ve left out a big customer segment, which is people who say, ‘Hey, Netflix is too expensive for me and I don’t mind advertising. “, he explained.
Then he said that Netflix is adding a new ad-supported offering, while ensuring that the group will not touch the experience we know today.
Moreover, just the presence of Ted Sandaros at the festival is already a signal that Netflix wants to get closer to the advertising industry. He also confirmed that Netflix is currently in discussions with potential partners for the use of its future advertising space.
Netflix forced to embrace advertising to face competition
It remains to be seen whether the publicity will allow Netflix to break the impasse in which it currently finds itself. Otherwise, an acquisition of SVOD by a larger group would still be on the table. Nevertheless, Sandaros assured that at this stage, Netflix still has the possibility of growing without going through an acquisition.
In any case, it should be noted that offers partially financed by advertising should become widespread in the VOD market. Indeed, Netflix’s competitors, to name only Disney+, have also decided to take this path.
Nevertheless, Netflix will have to be extremely careful when setting up this offer, first of all to avoid controversy related to confidentiality, but also not to display too many ads because it would harm the experience (even on a low-cost offer).
For its part, Disney + would have already determined the limits which will apply to the advertisements of its future low cost offer. Rumor has it that ads are limited to 4 minutes per hour of viewing. On the other hand, the company would have chosen not to display ads on content targeting children.