Advanced Television

Birthday Streamers

August 30, 2022

When the party-planners at Netflix first began to mull its quarter century celebrations, I’m betting they didn’t think they’d coincide with authoritative leaks about the new ‘budget’ ad supported version of the service.

No advertising has been part of the fundamental mandate of the founding father of streaming since it first thought of cutting back on its postage bill. It says now that it sees advertising as a way to let hard-pressed consumers continue to enjoy its service. But who thinks consumers will be sufficiently ‘unpressed’ by a $2 saving for it to make any difference?

It’s interesting that Netflix is apparently hooking up with Microsoft to develop the ad sales – and I’m sure it will present as a very Big Data savvy play, with personalised ads mimicking Netflix’s famous (and famously secret) personalised content planning.

But you do feel you could save them a lot of money as they figure out the fine print on the demographic pitch for their ad-supported channel. It doesn’t take a supercomputer to tell you they’re people who thought it was important to save two bucks a month on a TV subscription (yeah, okay, it will be more because Netflix will up the basic price). It will take a lot of AI to work up a media pack that will make that pitch sound good to advertisers who are basking in a buyer’s market.

Of course, the other way to look at the ad channel is as an attempt by Netflix to open a new revenue front because their existing business model is flawed. Their original (in every sense of the word) proposition was: low price, toggle on/off subscription, no ads, great content.

The content has got greater and greater, and therefore much more expensive. So, the low price has become a medium to high price. But price tipping points are being reached as markets hit hard times. And if you drop content quality, you risk a vicious spiral of churn. But you can’t keep the quality up if your revenue flat lines, or worse. And that’s before the nightmare of your mountain of debt becoming more expensive.

No wonder Netflix is looking for new revenue streams. But, particularly in a recession, advertising is a finite cake. You can have your slice so long as your plate is cheaper than the next outlet with the same reach. It’s a tough way to make money.

The sacred cow of no advertising has gone to the abattoir. How long before ‘no long-term subscription’ will follow. Many happy returns.

Categories: Advertising, Blogs, Business, Nick Snow, Off Message

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