Netflix essentially killed every part of the mainstream television business when it launched a streaming video service 15 years ago. But now that he’s facing an existential threat of his own from arrivals approaching from all sides, he’s borrowing his old rival’s playbook to save himself: advertising.
Starting Tuesday, Netflix will offer a version of its popular streaming service for a deeply discounted $5.99 per month. But there’s a catch: Instead of the current subscription packages that let users binge and binge to their heart’s content, the new, no-frills version with a smaller content library will intersperse ads before, after, and until all during the shows.
It’s a throwback to the commercial breaks that pay for mainstream TV programming.
It may seem strange to see the streaming industry come full circle, from being an alternative to cable TV packages that bundled 15 minutes of advertising into every hour of content, to returning to a model it eliminated.
But it is a sign of how inflation and higher costs have affected every part of the economy.
Sharing passwords a money loser
The streaming service is also taking steps to crack down on subscribers who share their passwords with friends, family and even co-workers, a practice that’s common but not allowed outside the home. Netflix didn’t seem to care much about password sharing, as the company was growing so fast that it trusted that anyone who got a taste of its content for free would sign up.
But that began to change this year, as high inflation prompted consumers to watch their spending dollars more closely, and the company posted back-to-back subscriber losses for the first time in its existence.
So, in addition to raising the prices of its ad-free subscriptions, Netflix will require subscribers to pay an additional fee if they want to share their password, starting in early 2023.
Vincent Georgie, director of the School of Creative Arts at the University of Windsor, says the industry is on the cusp of major consolidation, because “the average consumer is not going to sustainably hold two, three, four, five or six different streaming subscriptions. .’ (Katerina Georgieva/CBC)
“They’re losing a lot of revenue, by all accounts,” said Vincent Georgie, director of the School of Creative Arts at the University of Windsor in Windsor, Ont., in an interview with CBC News.
“They don’t want to lose people altogether, they want to push them into these lower-cost subscriptions.”
The ad-supported version of Netflix will cost $5.99 and will only be available on one device, without HD content. This is different from the ad-free versions that start at $9.99 per month and go up to $21.99 for subscriptions with all the bells and whistles.
Georgie said the industry is on the cusp of major consolidation, because “the average consumer is not going to sustainably maintain two, three, four, five or six different streaming subscriptions.”
It’s no coincidence that Netflix is rolling out a cheaper, ad-supported version, just as millions of people who used to use the service without a subscription are about to be blocked from doing so.
“If they are able to capture 60 percent of those users, that would be a nice increase,” Georgie said.
Ads must be special, the executive says
While consumers rarely say they like advertising, some in the industry say it doesn’t have to be, if it’s done right.
Deacon Webster, creative director of the agency Walrus in New York City, said Netflix would be very useful in highlighting its advertising offering by eliminating irritations like repeating the same ad multiple times and making unique, well-made and expensive ads. tailored to specific shows, which is what happens with the Super Bowl.
Unfortunately, Webster said, he doesn’t get the impression that’s what Netflix plans to do.
LOOK | Coming soon: A cheaper version of Netflix with ads:
Netflix is bringing back ads with a new, cheaper subscription option
Netflix’s Basic with Ads plan will offer customers a less expensive subscription option if they’re willing to put up with ads. Experts say it’s an attempt to lure price-conscious consumers to the streaming service.
“They don’t have special formats, they don’t allow any special sponsorships,” he said in an interview. “They’re going to be bought in the same way that typical advertising is bought through television and cable, so … it’s very likely that you’ll see the same ad over and over again, no matter what Netflix tells you the opposite. “
That’s disappointing for ad men like him, but for consumers like Hayley Markel, no amount of ads, even good ones, is attractive.
The Leduc, Alta., resident has been a loyal Netflix subscriber for five years and said she has no interest in saving money if it comes at the cost of being bombarded with more consumerism. “They’re strong, they’re kind. They’re nasty,” he told CBC News in an interview. “I can’t stand ads.
“I’ll still pay my regular price or a slightly increased price to not see them,” he said.
Hayley Markel of Leduc, Alta., who has been a Netflix subscriber for five years, says she has no interest in paying less for the streaming service if it means watching ads. (Anis Heydari/CBC)
Streaming companies and advertisers reckon that’s not a common view. In the US, streaming giants like HBO, NBC-backed Peacock and CBS-owned Paramount Plus have already introduced ad-supported versions, and Disney plans to launch one soon.
In Canada, a new service called Pluto is slated to launch in December with more than 100 channels of free TV shows, movies and sports streaming “live” online on a platform that mimics the experience of surfing by channels, with commercials.
At the same time, CBC will introduce a revamped free streaming news channel that will be available on CBC Gem and many other streaming platforms. A flagship show hosted by Andrew Chang will be the main attraction, with commercials interspersed throughout the day.
While there is skepticism among some, the University of Windsor’s Georgie said people should underestimate Netflix at their peril, because the company has a history of innovating and making rivals follow suit.
“Netflix will survive, I have no doubt about it,” he said, adding that he even thinks it’s likely that some who sign up for the ad-only version may quickly upgrade to more expensive ad-free versions once they see your options. .
If Netflix doesn’t strike the right balance, its foray into the debt-ridden TV business model could even lead to the return of another iconic television experience: the bathroom break.
“Ten minutes of Netflix commercials, I don’t know if I’m going to be sitting there glued to my seat,” he joked. “I would be sitting there but looking at other screens.”