A new report shed reveals additional details about Netflix's advertisement plans. Netflix originated as a DVD rental company before moving into the streaming circuit in 2007. Currently, the company competes with several prominent streaming platforms, including Hulu, Disney+, Apple TV+, HBO Max, and Amazon Prime. As the streaming wars escalate, it seems even Netflix may not survive without the help of additional revenue.
For years, Netflix remained the most popular streaming service by a fair margin. At the start of 2022, Netflix boasted an incredible 221.84 million subscribers. In April, however, Netflix reported subscriber loss amounting to 200,000. Subsequently, Netflix has been looking into other ways to increase its subscriber count and prevent future subscriber loss. Plans proposed included locking down on password sharing and, most notably, the potential introduction of a lower-priced, ad-supported subscription plan.
According to WSJ, Netflix must negotiate compensation with the major studios whose programming they carry. This would include older shows like Breaking Bad, for which Netflix has held streaming rights for over a decade. If Netflix is to put studios' content on an ad-supported platform, the affected studio will likely charge Netflix a 15-30% premium on the content. Studios will require further compensation to make downloads permissible. Netflix has yet to comment on specific details of its advertising. For example, the platform has not told content providers where ads will be placed within the programs nor what they will charge subscribers for the ad-supported option. Jeffrey Schlesinger, a former president of Warner Brothers Worldwide Television Distribution, notes:
“Any distributor being approached by Netflix is going to take steps to ensure they get proper value.”
A Netflix spokesperson adds:
“We are still in the early days of deciding how to launch a lower-priced, ad-supported option, and no decisions have been made.”
Inside details on Netflix's internal operations have been historically kept obscure. With the report of its massive subscriber loss this April, one thing is clear: Netflix will have to make changes to regain the powerhouse status it has maintained for years. That restructuring will come at a cost to the company, which will need to pay the premiums to content providers to play the content on their platform. Given the extra costs, Netflix may have to offer more limited titles to the ad-supported subscription plan.
However they end up getting there, Netflix seems to have big ambitions for the launch of the ad-supported platform. Netflix has reportedly told content suppliers that they would like an ad-supported program up and running by as early as the end of 2022. If Netflix creates the ad-supported option, it will be in good company. Hulu's most basic plan still has an ad-supported option. Will Netflix's new plans save the streaming giant? Only time will tell as Netflix continues developing its new subscription options.
Source: Wall Street Journal