Photo Credit: Netflix
Netflix has been struggling to keep up with the competition lately. The company lost a million subscribers in recent months, which is considered their most since they started 25 years ago. However, it seems like things are finally looking brighter for the media giant as they’ve announced new strategies that could help them gain more subscribers and ultimately win back the lost revenue.
Netflix is taking on the industry with new initiatives that will benefit the company by lowering ad costs and fighting against password sharing. Wall Street has been pleased by these efforts as well.
Netflix has faced several issues which are preventing them from growing and becoming more profitable. They need to crack down on password sharing and counter several issues. However, these steps might brush out the promise of the ‘best overall experience’ of the streaming company.
“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,” an analyst at MoffettNathanson, Michael Nathanson, said.
The media analyst added, “So the original consumer proposition, which was incredibly great value, is now flipping on its head.”
The Netflix plan is what the company needs in order to boost their profits, but it’s not necessarily something consumers would want.
Ad-free no more for Netflix
The Netflix management said last 2019, “We … are advertising free. That remains a deep part of our brand proposition.”
With the decision for an ad-free streaming, the company believes that it can stay ahead in a cutthroat industry by focusing on the users’ experience.
The newfound strategy by Netflix compelled them to get on board with Microsoft. The two companies announced last week that they will be collaborating to create an advertising tier for Netflix. It’s set to launch in early parts of 2023.
With the new pricing scheme, subscribers will have a choice of plans. The one without ads costs more than the package with ads.
“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,” said Zak Shaikh, the Vice President of the media firm Magid.
Shaikh then posed several questions to the streaming giant. “Will ads have an impact on content standards and the supposedly ‘artist-friendly’ environment of Netflix?”
“Will advertisers expect Netflix to censor certain content that right now Netflix has not had to be concerned about?” Shaik further asked.
Password sharing now forbidden by Netflix
Netflix has been cracking down on password sharing since the number of subscribers went down. This poses some damage to their business but they are still considering on doing this because it is one of the major contributors to Netflix’s revenue loss.
Netflix said that it is in its “early stages of working to monetize the [more than] 100 million households that are currently enjoying, but not directly paying for, Netflix.” Simply put, password sharing would mean higher cost for the subscriber.
The change in the policy will make it difficult for people who have been sharing their accounts with friends and family members. “We know this will be a change for our members,” Netflix said in a statement.
With Netflix in a lot of trouble, it’s not surprising that they’ve started cracking down on password sharing. The company needs subscribers and revenue if only for their own survival and to continue their operations.
A media analyst said, “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.”
“All the incredible value and goodwill that they built is at risk of being jeopardized.”
Opinions expressed by US Insider contributors are their own.