Photo Credit: Netflix
Netflix is facing its most difficult time in its history. The company lost a million subscribers during the last quarter, which has been considered one of their worst ever despite since its foundation 25 years ago. However, they have since rebuilt this loss with hopes for better things ahead that will boost revenue and attract subscribers.
Netflix has introduced new initiatives to improve their service and add new avenue for income. The company’s move was met with praise from Wall Street, which sees this as a positive step forward in increasing profits due largely to lowering advertising rates coupled alongside increased enforcement efforts against password sharing among subscribers.
Netflix is fighting an uphill battle to remain competitive in the streaming industry. However, to keep up with the competition, the promise of the ‘best overall experience’ may be sacrificed in the process. The company needs to crack down on password sharing and deal with issues that hamper it from reaching the full potential of its income.
“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,” said Michael Nathanson, a media analyst at MoffettNathanson said.
“So the original consumer proposition, which was incredibly great value, is now flipping on its head,” Nathanson added.
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The company’s planned strategy is what they need to boost profit, but that isn’t necessarily the best thing for consumers.
No ads bugging you in Netflix? Not anymore
In 2019, Netflix said, “We … are advertising free. That remains a deep part of our brand proposition.”
It is the belief of the company that the best way to stay out of the competition for ad revenue and satisfy viewers more, is by focusing on the best experience for consumers – ad-free content.
This new company development pushed Netflix to get Microsoft on board. The streaming service has announced they will be creating an ad tier with Microsoft, which hits early parts of 2023.
The company has revealed their plans for subscribers following the recent update. The new pricing structure, which goes into effect soon and requires users to choose between no ads or with ads – the latter is cheaper than the former.
According to the Vice President of media firm Magid, Zak Shaikh, “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.”
“Will ads have an impact on content standards and the supposedly ‘artist-friendly’ environment of Netflix?” Shaikh further asked questions directed to the streaming giant. “Will advertisers expect Netflix to censor certain content that right now Netflix has not had to be concerned about?”
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Netflix on password sharing
With the number of subscribers on Netflix going down, it is a consideration for the management to crack down on users who share their password among peers. However, this could pose some damage that needs monitoring carefully.
The company 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.”
The new measure will make it difficult for subscribers who have been sharing their accounts with friends, families and acquaintances. “We know this will be a change for our members,” the company said.
Netflix is friendly towards password sharing. Only when the need to crack down on the activity, should they want to keep the company afloat, would they strictly enforce the policy.
“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,” said a media analyst. “All the incredible value and goodwill that they built is at risk of being jeopardized.”
Opinions expressed by CEO Weekly contributors are their own.