Can the new ad-supported subscription avoid Netflix’s complicated situation?
To combat the massive loss of subscribers, Netflix will launch a new, cheaper subscription plan with advertising. Will the ads be able to save the streaming platform’s complicated situation?
This 2022 is not being particularly favorable for Netflix, as for the first time in over a decade the streaming giant acknowledged suffering a serious loss of subscribers in recent months, with a first quarterly drop of 200,000 total subscribers.
This has led Netflix to start taking measures to counteract this massive loss of subscribers, including the controversial measure to prevent users from sharing Netflix account or Netflix’s economic plan with advertising.
At the moment it has not made clear how this new cheap subscription rate with ads will work on Netflix nor at what time such an option will be enabled, so we will have to wait for more details to be unveiled in this regard. What Ted Sarandos, co-CEO of Netflix, did confirm is that advertising will not be incorporated into the current rates, but that it will be a completely new rate option for those users who are interested in purchasing Netflix at a lower price.
However, the question must inevitably be asked – can ads save Netflix’s complicated situation? According to Netflix’s co-CEO, it does appear that there are many people interested in such a subscription.
Other platforms such as Disney, Amazon Prime and Roku have implemented small ads that appear on screens, in exchange for a relatively low subscription price. This has caused Roku, for example, to grow its revenue much faster than Netflix despite having a much, much smaller market share.
That is why, if Netflix introduces a plan with low-cost advertising and obtains around 100 million subscriptions from non-users where they receive an advertising revenue of $40 per year per user (as is the case with Roku), the company would accumulate an additional revenue of $4 billion.
It should also be noted that Netflix significantly increased subscription prices in the United States, the United Kingdom and Ireland, Australia and Canada, so it is possible that many who left the platform may decide to return with this new cheaper rate with advertising. But there is also a risk that customers who now have the cheaper rates will drop down a notch and switch to these even cheaper rates thanks to advertisers. So no one can know at the moment what the outcome of that move will be, and we would really love to know.
Regardless of its pricing policy, Netflix also has to review its product, trying to have great productions that attract users, such as Stranger Things, The Squid Game or The Bridgertons if they don’t want to lose more subscribers.