Netflix essentially killed every part of the conventional television business when it launched a streaming video service 15 years ago. But now that he faces an existential threat of his own from upstarts closing in on all sides, he borrows from his old rival’s playbook to save himself: publicity.
Starting Tuesday, Netflix will offer a version of its popular streaming service at a heavily discounted rate of $5.99 per month. But there’s a catch: Instead of the current subscription plans that let users binge on content endlessly and uninterrupted, the new no-frills version with a smaller content library will intersperse ads before, after, and even during broadcasts.
It’s a throwback to commercial breaks that pay for programming on conventional television.
It may seem strange to see the streaming industry come full circle – from being an alternative to cable TV packages that included 15 minutes of advertising for every hour of content, to returning to a model it has eliminated.
But it is a sign of how inflation and rising costs have spread through all sectors of the economy.
Sharing passwords a loser of money
The streaming service is also taking steps to crack down on subscribers who share their passwords with friends, family and even coworkers — a common practice but not allowed outside of a household. Netflix didn’t seem to care much about password sharing, as the company was growing so quickly that it was confident that anyone who got a taste of its content for free would eventually sign up.
But that started to change this year, as high inflation prompted consumers to watch their spending more closely, and the company saw 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 ask subscribers to pay an additional fee if they want to share their password, starting in early 2023.
“They’re losing a lot of revenue, from all the shared accounts,” Vincent Georgie, director of the School of Creative Arts at the University of Windsor, in Windsor, Ont., said in an interview with CBC News.
“They don’t want to completely lose people, they want to push them to these lower cost subscriptions.”
The ad-supported version of Netflix will cost $5.99 and will only be available on one device, with no high-definition content. It’s different from ad-free versions that start at $9.99 per month and go all the way up to $21.99 for subscriptions with all the bells and whistles.
Georgie said the industry is on the verge of consolidation because “the average consumer isn’t going to sustain two, three, four, five or six different streaming subscriptions for a long time.”
It’s no coincidence that Netflix is rolling out a cheaper ad-supported version, just as millions of people who used the service without a subscription are about to be locked out.
“If they’re able to capture 60% of those users, that would be a nice boost,” Georgie said.
Ads must be special, says exec
While consumers rarely say they like advertising, some in the industry say it doesn’t have to be, if done correctly.
Deacon Webster, creative director of the Walrus agency in New York, said Netflix would be well served to make its ad offering stand out by eliminating irritations such as repeating the same ad multiple times and creating unique ads, well made and expensive. tailored to specific shows, which is happening with the Super Bowl.
Unfortunately, Webster said, it doesn’t feel like that’s what Netflix plans to do.
Netflix’s Basic with Ads plan will give customers a cheaper subscription option if they’re willing to accept ads. Experts say it’s an attempt to lure price-conscious consumers into the streaming service.
“They don’t have any special formats, they don’t allow any special sponsorships,” he said in an interview. “They’re going to be bought like typical advertising is bought on network and cable TV, so… chances are you’ll see the same ad over and over again, no matter what Netflix tells you otherwise.”
It’s disappointing for advertisers like him, but for consumers like Hayley Markel, no advertising, no matter how good, is appealing.
The Leduc, Alberta resident has been a loyal Netflix subscriber for five years and said she has no interest in saving money if it comes at the expense of being bombarded with more consumption. “They’re loud, they’re kind of obnoxious,” she told CBC News in an interview. “I just can’t stand the ads.
“I will continue to pay my normal price or a slightly increased price so I don’t watch them,” she said.
Streaming companies and advertisers are banking on the fact that this is not a common view. In the US, streaming giants such as 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 set to launch in December with more than 100 channels of free TV, movies and sports streamed “live” online on a platform that mimics the experience of browsing internet. channels, with advertisements.
Around the same time, CBC will introduce a revamped free streaming news channel that will be available on CBC Gem and several other streaming platforms. A flagship program hosted by Andrew Chang will be the main attraction, with advertisements scattered throughout the day.
Although some are skeptical, Georgie from the University of Windsor said people should underestimate Netflix at their peril because the company has a reputation for innovating and making rivals follow suit.
“Netflix will survive, there’s no doubt in my mind,” he said, adding that he even thinks it’s likely that some who sign up for the simple ad version might quickly upgrade to more expensive versions without ads, once they see their options.
If Netflix doesn’t strike the right balance, its foray into borrowing the TV business model could even lead to the return of another iconic TV experience: the toilet break.
“Ten minutes of Netflix commercials, I don’t know if I’m gonna sit glued to my seat,” he joked. “I would be sitting there but looking at other screens.”
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