It was always going to happen eventually. With so many competitors breathing down their necks offering more streamlined, cohesive and cost-effective alternatives, there was only so many serial killer documentaries Netflix could throw at the problem – they needed to do something drastic.
So, Netflix finally decided to announce they were looking into a tiered subscription model with advertising bolstered onto the bottom tier. This is a move that would have seemed shocking and counterproductive five years ago when Netflix was at its peak, but with dwindling subscription numbers and the likes of Disney + nipping at their heels, they had to act and, financially, this seems like the smartest play.
The fact is, Netflix has grown too big for its own good. There are literally thousands of Netflix Originals series to choose from and, rather than scale back their production, Netflix appears to have settled on a model of quantity over quality.
Sure, you’ll have the occasional Stranger Things behemoth or surprise hits like Squid Game and the recent Jeffrey Dahmer drama but the vast majority of Netflix content these days is filler. And filler doesn’t pay for itself.
Back to the old ways
The idea of using advertisements to financially bulk out a streaming platform is not a new one. Indeed, YouTube has been doing it since the very beginning. The difference now, however, is that Netflix is subverting the trend by essentially going backwards.
This isn’t necessarily a bad thing (sometimes we have to take two steps back to take one forward and all that) but many marketers have already expressed concerns with how much Netflix is supposedly planning to charge advertisers to flog their wares between episodes of “Is it cake?”
Several agencies have outlined Netflix’s plans to charge $65 CPM (the price of serving ad impressions to 1,000 people), which is significantly more expensive than many streaming services and even events like the Super Bowl. They might also be looking for an eye-watering minimum spend of $20m, which sets a dangerous precedent.
After all, if the minimum spend is indeed this astronomical it locks out all but the biggest of the big global brands and that could lead to a depressingly monopolised platform. You see, people don’t mind sitting through ads, we’ve been programmed to tolerate it for decades now.
What they do mind, however, is sitting through the same ad for the same brand every time there’s an ad break. Therein lies cancellations.
All cart no horse
What’s most shocking is that Netflix is apparently set to launch its new ad-based model with no measurement partner on board. For marketers that want some ironclad figures to latch onto before making the commitment, that could be a dealbreaker.
Then there’s the fact that Netflix might not even be equipped to scale its ad product enough to be worth consideration. Reports vary wildly between 500,000 and 4.4m as far as the number expected to sign up on launch and, in a best case scenario for Netflix, these would be new subscribers rather than ‘downgraders’.
Honestly, I don’t think Netflix with ads is a bad idea. It’s just they seem to be going about it completely the wrong way. Of course, it’s early days yet and they still have time to turn it around. And if Liz Truss can make a last-minute U-turn on the economy, I’m sure Netflix can do likewise with their ad model.
