Tag Archive: netflix

  1. Will AVOD create a brighter future for Netflix?

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    Between April and July 2022, Netflix lost nearly a million subscribers, the biggest loss in its history. It was the streaming platform’s second consecutive quarter of declining subscriber numbers; after years of what seemed to be unstoppable growth, this was a dramatic change in fortunes. The decline is largely down to a shift in lifestyle after the pandemic, alongside the introduction and development of competitors such as Amazon Prime and Disney+. Whilst Netflix subscriber numbers remain significantly higher than those of its competitors, its share price plummeted by more than 60% as a result of falling confidence in the platform. It was apparent that it needed to take action in order to remain a leader in the sector. In an attempt to achieve this, the platform introduced an ad-supported membership tier, the first time Netflix ventured into AVOD since it began streaming in 2007.

    What can I expect from the new Netflix AVOD tier?

    Netflix Basic with Ads is an ad-supported subscription which comes at a lower cost to the consumer but means that ads will be shown before and during most shows. Ad load will average approximately four minutes an hour, and roughly 5-10% of TV shows and films will not be available on this tier due to licensing restrictions. Downloads are also unavailable. In the US, the Basic with Ads membership costs $6.99 a month ($1 cheaper than the Disney+ ad-supported platform launching next month), in comparison to the standard membership which costs $9.99 per month. The ad load is lower than Hulu’s, which has around five minutes of ads in a single 22-minute episode, and is on a par with HBO’s.

    Cheaper for consumers, expensive for advertisers

    At launch, Netflix claimed to have almost sold out all ad inventory following ‘overwhelming interest’ from global advertisers. Some media agencies have been hesitant when discussing buying space to advertise on Netflix. Ad space on Netflix’s AVOD platform does come at a premium, with a CPM of $65. This price point is around the same as that of a premium spot on broadcast TV. That makes Netflix one of the most expensive platforms on which to advertise, although its pricing is expected to drop once the initial launch period is over. Not only is it expensive, but Netflix is also asking for year-long contracts upfront and for advertisers to commit quickly, which is off-putting for some.

    Room for improvement

    Agencies have also suggested that the platform is not yet sufficiently well developed to warrant these price levels and that seeing how well the service works will be imperative prior to committing to placing shows. Whilst Netflix has ‘very tight frequency caps’ that will restrict the number of times an ad will appear for an individual viewer, the platform’s targeting and measurement still need work.

    Many industry insiders have remarked on the fact that Netflix’s targeting capabilities are not in line with the prices they are charging. In response, Netflix has confirmed that in the coming year they will begin working with BARB and Nielsen in order to gather the more detailed data that advertisers demand, such as show ratings and detailed information on who is watching them. Once this information becomes available, it is expected that many more brands will be interested in Netflix’s advertising opportunities.

    Based on the results of a survey conducted by The Harris Poll, there is a great opportunity for Netflix and other streaming services to ensure that they are optimizing the advertising experience they are able to offer. A clear trend in the survey was that currently, ‘streaming-service ads are boring, repetitive and unpersuasive, with an overwhelming 81% of respondents stating they see the same ads repeatedly. 55% are of the opinion that streamed ads are less interesting than aired ads. Questions around interactive ads and ads tailored to the content being watched caused a more even divide across subjects. However, younger and older millennials, as well as Gen Xers, who are the most likely to be using a streaming service, were in favor of interacting with an ad if it meant the rest of the show would be uninterrupted. Since these demographics are likely to make up a large proportion of audiences, this may be a factor for Netflix to consider.

    Peter Naylor, Netflix’s sales VP, has spoken out about the new path for the platform and has confirmed that this is just the beginning. Co-CEO Ted Sarandos even stated that ads on the platform would be ‘better than TV’. Shoppable ads, multi-screen viewing and collaborating intensely with Netflix creators are some of the ideas on the table for the future.

    A change in fortunes

    According to AdAge, Netflix is expecting its foray into AVOD to generate 500,000 subscribers by the end of the year. The introduction of the cheaper subscription has come at the perfect time: with the cost of living rising globally and the festive season around the corner, households are certainly looking for ways to cut spending. Having gained 2.4 million subscribers in the third quarter as a result of strong new content, in particular ‘Stranger Things 4’, Netflix share prices rose by 14%.

    A change in focus

    Going forward, Netflix is eager to steer investors towards focusing on revenue rather than subscriber numbers; to encourage this, they will stop forecasting subscriber numbers. The rationale behind this is that whilst focusing on subscribers during early growth was helpful, now that there is such a wide audience who can be paying a range of fees, the economic impact of a consumer can vary, so revenue is a more important metric. It is no wonder that Netflix is trying to shift the focus to revenue, with potential new subscription fees coming in as well as a predicted $830m from ads next year.

    AVOD will help Netflix to reinforce its leadership

    Alongside the introduction of the ‘Basic Ads’ membership, Netflix is planning to crack down on password sharing as we go into the new year. It will now allow people sharing their accounts to create sub-accounts to pay for family and friends to use theirs. So whilst this may not increase the number of subscribers, revenue will increase. Netflix continues to lead the streaming industry by innovating and discovering ways in which to maximize viewership, whilst remaining as accessible as possible. This should help to future-proof its business model and allow it to remain a worthy competitor of the likes of Disney.

    Content is still everything

    Embracing AVOD will undoubtedly help Netflix to bolster its bottom line, but it’s not the be-all and end-all. For Netflix and all its competitors, a successful future lies in the quality of the content it creates. The content is the product, and subscribers will only pay the subscription for content they enjoy – with or without ads.


  2. Disney versus Netflix: The AVOD battle

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    For years, Netflix was the king of the streamers, enjoying a near-monopoly of the streaming market and steady growth of its subscriber growth across the world. Recently, however, it has come against increasing competition from the likes of Amazon Prime, Peacock, HBO Max, Apple TV and especially Disney+. Disney+, The Walt Disney Company’s streaming platform, has enjoyed stratospheric growth over the last few years, and its results so far this year far outshone Netflix’s. With both platforms taking their offering to the next stage later this year by launching their ad-supported tiers within weeks of one another, we look at the state of play and explore what the war between the platforms means for advertisers.

    2022: The year Disney’s long-term plan paid off

    The growth of Disney+ into one of the biggest streaming platforms in the world may seem like a recent phenomenon but it is the result of a carefully thought-out, 15-year-long strategy to reinvigorate the Disney empire. Of course, there were other factors at play; a global audience primed by Netflix for streaming, and the serendipitous launch of Disney+ just as the world went into lockdown and people were eager for entertainment and relief. But content is king when it comes to winning in the streaming industry, and that has been Disney’s relentless focus since the mid-2000s. Major acquisitions have included Pixar in 2006, the Marvel Comics superhero universe in 2009, George Lucas’ Lucasfilm (including the Star Wars franchise) and 21st Century Fox in 2019 (which included operational control of Hulu). The resulting content base was ripe for the launch of Disney+ and, with content that was so much more famous and abundant than Netflix’s, it’s not surprising that Netflix is struggling to keep up.

    The rise and rise of Disney+

    As already mentioned, Disney+ benefited from the fortuitousness of launching an on-demand streaming platform precisely at a time when people needed at-home entertainment more than ever before. But even taking that into consideration, its growth has been remarkable. It had reached 100 million subscribers just two years after launch, far exceeding its goal of 60-90 million users by 2024. By comparison, it took Netflix a decade to reach 100 million subscribers, despite a much less competitive market – although it was also creating that market as it went along. Recently, there have been concerns among investors that the streaming industry is slowing down – concerns that were fuelled by Netflix’s results in the first two quarters of this year. But Disney has defied these worries: subscribers to Disney+ reached a new high of 152 million in the third quarter of this year, having added a remarkable 14.4 million in the second quarter. When the Disney+ tally is added to subscriber numbers for Hulu and ESPN, the total number of subscribers for platforms owned by The Walt Disney Company amounted to 221 million, surpassing that of Netflix.

    Netflix’s struggle to stay ahead

    Netflix is still the single biggest streamer, with just over 220 million subscribers, but 2022 has been a difficult year for the company. Their numbers seem to be following a pattern of stagnation, losing 200,000 in Q1 and a huge 970,000 in Q2. They are of course at a different developmental stage to Disney+, and at least part of Netflix’s stagnation is down to saturation as well as other factors such as the rising cost of living and the end of lockdown restrictions. However, content is also an issue: Netflix does not have a back catalogue of the scale of Disney’s, and Disney and many other media companies are ending the licensing of their content to Netflix so they can use it on their own platforms.

    Netflix’s challenges and its disappointing results earlier this year prompted it to announce that it would be introducing an ad-supported tier to its platform. This caused ripples of excitement across the advertising industry, which has always been eager to target audiences which can otherwise be hard to reach. Netflix had been planning to launch the new AVOD platform in early 2023 but when Disney+ threw its hat into the ring with a launch date of 8th December, Netflix brought its launch forward to early November.

    Disney versus Netflix AVOD: The clash of the titans

    So, Netflix and Disney+ are going head-to-head with launches of their AVOD platforms within weeks of one another. This will be an exciting and transformative time in the advertising industry: a sizeable proportion of Netflix’s audience, for example, is notoriously difficult to reach via other channels. So, what will advertising on these platforms entail? As things stand, we know more about Netflix’s proposed offering than Disney+, although we do know that both are anticipated to have a light ad load, with about four minutes an hour for TV series. Disney is expected to start with 15-30-second spots, but will expand to a ‘full suite of products’ over time.

    While Disney+ executives will be able to rely on the company’s past experience with advertising, both on cable TV and on other platforms it owns. For Netflix, however, this is fresh territory – although they have hired experts with plenty of advertising experience, and have partnered with Microsoft to build their AdTech capabilities.

    There has been more reporting on Netflix’s proposition. In early September, ad buyers were asked to submit initial bids, with a ‘soft’ CPM of $65, well above the industry average CPM of under $20, and similar to premium NFL CPMs. Netflix is asking advertisers to make a $10 million annual commitment, but with limited targeting: during the first phase, brands will be able to buy against top viewed series and some content genres, but not against geography (except country), age, gender, viewing habits or time of day. Movies are expected to have pre-rolls only, and frequency capping will be low by industry standards – one per hour and three per day.

    Challenges ahead

    By launching their ad-supported tiers within weeks of each other, the two biggest global streaming platforms are going head-to-head in a new field. They are facing a difficult market: with rising inflation and the growing cost of living, consumers will be looking to make cuts, and streaming subscriptions may be seen as a luxury. Of course, the streaming giants will be hoping that the introduction of their AVOD platforms will help to mitigate this, but it won’t be easy, especially if they are to avoid cannibalization of their premium, ad-free tiers. It will be fascinating to see who plays the AVOD cards better.

    This is an exciting moment for advertisers – not only will they be able to reach new audiences, but investment in the infrastructure around advertising in streaming will create exciting new opportunities and capabilities. The industry will look on with interest as the two companies lands on a defined pricing strategy – we will come back with analysis when it is available.


  3. Netflix advertising: a new frontier for the ad industry?

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    Following poor Q1 results, Netflix announced that it will be introducing an ad-supported tier to its streaming platform. So what does Netflix advertising mean for the rest of the industry? 

    When the so-called ‘streaming wars’ kicked off, no one imagined that just around the corner was a global pandemic. A global event that would change the face of the world, the economy and consumer behavior. At first, Netflix, Disney Plus and their competitors reaped the benefits of lockdowns across the world. Bored consumers, unable to find entertainment or spend their money elsewhere, signed up to the streamers in their millions. Disney Plus reached 90 million subscribers three years ahead of schedule at the end of 2020. Netflix added an additional 37 million subscribers in 2020, bringing its total to over 200 million. Indeed, this huge increase in subscriptions helped to bring Netflix into the black for the first time in 2021. 

    More than two years on, the world has largely learned to live with Covid-19. Normal life has more or less resumed, so where does that leave the streamers?  

    Netflix – boom,  bust and boom again?

    The new normal has certainly had an impact on Netflix, along with the higher cost of living and other factors. Netflix announced in April that it had lost 200,000 subscribers in Q1 2022 – its first-ever decrease in subscribers. The company blamed the loss on several factors, including high penetration, economic factors, the war in Ukraine (Netflix has pulled out of Russia), and the high number of customers who share their passwords with non-paying households. But whatever you blame it on, it was a bad quarter for Netflix, particularly in comparison to Disney, who announced that they had added nearly 8 million subscribers in the same quarter. 

    It was against this backdrop that Netflix CEO Reed Hastings made his big announcement: Netflix would introduce an ad-supported tier. This was in stark contrast to the platform’s long-standing opposition to ads. Netflix has since announced that the new, lower-priced tier could launch as early as the end of this year.  

    What Netflix advertising means for the rest of the streaming industry…

    In recent years, a belief that 1 billion households were willing to pay for streaming services led to huge investment in the streaming sector. Much of the money from this investment was poured into content creation. The theory was that better content equals more subscribers. Netflix invested so much into content creation that it only became profitable for the first time in 2021. However, it is becoming clear that the market is likely much smaller than originally believed, especially given that high penetration was partly blamed for Netflix’s weak Q1 results. The streaming platforms need to find new ways to deliver growth – and that’s where advertising steps in.  

    Many assumed that Netflix’s lost subscribers were lost to competitors. However, research revealed that in the two weeks after cancelling a Netflix subscription, 87% of subscribers had not signed up to a rival service. This suggests that cost is the key factor. That makes a lower-cost, ad-supported version more appealing – although Netflix will be keen to avoid cannibalising subscriptions to its top tier. 

    Although Disney’s subscribership is healthier than Netflix’s, it is also watching its outgoings carefully; Bob Chapek announced that the company would be cutting its overall film and TV spending by $1 billion this year. It is also launching an ad-supported tier for Disney Plus, which it is in a good position to do thanks to its experience in the space with Hulu. 

    …and for advertisers?

    For a long time, TV advertising has, slowly but surely, been losing its sheen, compared to more measurable and targetable formats such as online channels, and more exciting ones like podcasts. With increasing numbers of consumers cutting the cord on cable and ‘going dark’ to ad-free environments such as Netflix and Disney Plus, advertisers have had to fight it out for live sports programming in order to reach large audiences. But, thanks in no small part to the news from Netflix, it’s back with a bang. Advertisers will be excited about reaching Netflix’s binge-watching audiences and – as a newcomer to the advertising scene – it is hoped that Netflix’s ad offering will be high-quality, prompting many advertisers to truly embrace non-linear channels. That said, viewers who have higher incomes and are therefore more attractive to many advertisers will likely remain on the ad-free version, out of reach to the advertisers who are so keen to reach them. It will be interesting to see if they choose to advertise on Netflix anyway. 

    Netflix’s announcement meant it was to late for the streamer to join the US Upfronts this year, but many advertisers will be excited about its anticipated arrival at next year’s Upfronts.

    What will Netflix advertising look like?

    It is currently unclear how Netflix will approach selling advertising – it could use an outside company, develop an in-house ad sales team (which will require significant hiring), or it could acquire an ad company or a company that already has an ad offering – such as Roku. But no matter which direction it goes in, it will benefit from being immensely data-rich, thanks to its cloud storage, audience insights and email addresses. If it approaches advertising carefully and intelligently, it could potentially set a new standard for advertising on TV, creating an experience which is both enjoyable for the viewer and rich with benefits for the advertiser. It will be undoubtedly keen to keep its user experience as clean as possible, so will likely seek to avoid banners on its homepage. It could also use pre-rolls rather than interrupt shows with ads.  

    An article on AdExchanger recommends that it combines content, commerce and commercials into a seamless experience. Gamification, for example through ‘choose your own adventure’ ads, would allow brands to generate more data as well as to build engaging CTV experiences. One-click shopping would enable brands to ‘capitalize on a seamless and closed loop’ to drive conversions and revenue, as well as to collect valuable data. Finally, if Netflix plays its cards right, it could own a vast wealth of extremely attractive first-party data with which it could build and sell audiences. Its existing contextual recommendation platform could be repurposed to handle ad optimizations and outcomes, similar to a walled garden. 

    The future of advertising on streaming platforms

    Netflix’s announcement that it will introduce an ad-supported, lower-cost tier has sent ripples of excitement across the industry. This is the company that almost single-handedly created the streaming category, pioneering a model that has been replicated by many, from the entertainment conglomerates to smaller, specialist streaming platforms. Its move into advertising, after so many years of refusing to even consider it, will be eagerly watched and could – if executed well – create a new standard for ads in both the streaming industry and the wider TV industry. 

    Header image: Venti Views on Unsplash

  4. The streaming wars part two: Pandemic

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    Until late 2019, Netflix was the undisputed king of the streaming sector. It had competitors, notably Amazon Prime, but its subscriber base, content catalog and accessibility were almost unrivalled. 2020 heralded the much-anticipated ‘streaming wars’, with many media companies such as Disney, NBCUniversal, ViacomCBS and AT&T releasing their own streaming services. The competition was always going to be fierce, and then coronavirus came along. The global pandemic forced billions of people indoors for weeks and months, and many turned to the streaming services – old and new – for entertainment. A lack of live sport also drove many fans into the arms of the streaming services.

    Strong Q2 performances

    The streaming platforms’ second-quarter results reflected the millions of new subscriptions, with particularly remarkable performances from Netflix and newcomer Disney+. For the big media companies, streaming performance was a bright spot in balance sheets dominated by bad news in the form of closed movie theaters, canceled sporting events and major advertisers slashing their TV budgets. But as the world slowly transitions into a post-pandemic landscape, can the streaming services maintain their success?

    Let’s start with a round-up of the major players’ performances over the last two quarters.


    Netflix had an incredible Q2, adding 10 million subscribers to end the first half of the year, to a total of 193 million subscribers across the world. That was on top of an unprecedented addition of 15.7 million subscribers in the first quarter of the year. However, Reed Hastings, Netflix’s co-CEO, warned that this kind of growth couldn’t last, suggesting that the pandemic had pulled subscriber growth into the first half of the year. He predicted that the platform would attract just 2.5 million new subscribers in the third quarter, a prediction which caused Netflix’s share price to plummet.


    Many argue that Disney+, The Walt Disney Company’s much-publicized on-demand streaming service, is the big success story of the pandemic. It is the biggest streaming launch on record, with a huge 10 million subscribers in the 24 hours following its launch, and more than 60 million subscribers by early August – four years ahead of their target of 60-90 million subscribers by 2024. This is particularly impressive given that they have yet to complete their global roll-out. Including Hulu and ESPN+, both of which it also owns, The Walt Disney Company’s streaming subscriptions now top 100 million.

    Peacock and HBO Max

    It is still early days for NBCUniversal’s Peacock, which is ad-supported, and AT&T’s HBO Max, which is the premium version of cable channel HBO. Peacock launched in the US in mid-July, and at the time of writing has attracted 10 million subscriptions – a third of its 2024 target. Meanwhile, HBO Max launched in late May and has grown the pool of HBO and HBO Max customers by 1.7 million in the first half of this year, to a total of 36.3 million subscribers. It is helping AT&T to mitigate the effects of cord-cutting, although there are signs that HBO subscribers don’t yet fully grasp what the new service offers, or how and why they should get it.

    Is brand-supported streaming the future?

    It is indubitable that the coronavirus pandemic has created extremely favourable market conditions for the streaming platforms, both new and established. But, as Reed Hastings said, it’s possible that it has simply pulled 2020’s – and possibly 2021’s – entire pool of new subscriptions into the first half of 2020. To date, the streaming companies have focused on the production of high-quality content to lure new subscriptions and maintain revenue. But content by itself isn’t enough – Quibi’s unsuccessful launch is testament to that – and, what’s more, supply far outstrips demand: consumers in the US subscribe to an average of three SVOD services. The streamers will need to find new ways to deliver increasing value to shareholders.

    There has been some concern amongst advertisers about the growth of ad-free streaming, but many industry players now agree that brand support seems almost inevitable. With ad dollars always wanting to follow eyeballs, there are potentially billions of ad dollars up for grabs. What’s more, the consumer data that the streamers own will be of huge value to advertisers, allowing the likes of Netflix and Disney+ to compete with that infamous tech duopoly, Facebook and Google. Horizon Media CEO Bill Koenigsberg told AdAge earlier this year, ‘if they [the streaming companies] go that way, if they will be able to allow us to unveil the walled gardens and provide data back, then that’s an enormous competitor to the Facebooks and Googles of the world in terms of the audiences these platforms are going to attract and our ability to engage with them’.

    The big streaming platforms have huge tech capabilities which will allow them to create new ad models, formats and partnerships to drive revenue. However, they will need to prioritise consumer experience – part of the appeal of the streaming platforms is the low ad load, or total lack thereof, particularly for US viewers who often sit through more than 15 minutes of ads per hour on primetime TV. Brand partnerships will need to enhance rather than disrupt the consumer’s experience.

    A key moment in streaming

    While the streaming sector has been one of the few winners of 2020, it is far from certain that this success will continue. As the world continues to emerge from lockdown, the economic ramifications of the pandemic are becoming clear. Many countries, including the US, are in recession and unemployment is rising dramatically. Consumers will be looking for ways to make savings and non-essentials such as streaming subscriptions may well be among the first thing to go, particularly as restrictions on other parts of life ease. Netflix, Disney+ and their competitors will need to work hard to retain consumers and maintain their profit.

    Image: Metamorworks / Shutterstock

  5. What does TV fragmentation mean for US marketers?

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    ECI Media Management’s US Business Director, Victoria Potter, looks at the changing TV landscape and explores the ramifications.

    This week, eMarketer released an article stating that this year, there will be about a 3% decline in TV ad spend from 2018, and that trend shows no signs of slowing. By 2022, eMarketer is predicting that TV ad spend will drop below 25% of total us ad spending. Of particular interest is that, the typical “political year” bump that has been prevalent in previous years will not be as great in 2020, only accounting for about a 1% increase, followed by steady 1% decreases in the following years. Contributing to this decline is steady growth in cord cutters and ratings decline.

    Nielsen is showing steadily declining ratings over the past few years. In the desirable Prime daypart, C3 ratings have seen a 33% decrease from 2016 to present.  While ratings are declining, networks continue to show increases in pricing – with Nielsen reporting a 7% increase in spend during the same period. And, coming out of the latest Upfront, networks were seeing low-double digit increases, despite lower audiences.

    What does this mean for marketers? Linear TV still provides efficient reach build. However, the days of one-size-fits-all tentpole events are over, and not coming back. It is important to adjust the media mix to account for audience erosion and fragmentation.

    Connected TV increases

    Meanwhile, as we see Linear TV spend decreasing, another eMarketer report out this week predicts Connected TV spend will reach around $7 billion, a 38% increase vs. 2018, and projected spend of over $14 billion by 2023. Connected TV is defined as TVs, smart TVs and TVs hooked up to the internet via a set top box, game console or similar device.

    A reminder: the day is still 24 hours long

    The amount of new content available is staggering: Hollywood Reporter stated in June that 2019 was on track to top the 2018 year-long high of 495 scripted series. To add to the proliferation of streaming services already available (Netflix, Amazon, Hulu), this month sees the launch of Amazon TV Plus and Disney+, the latest, but not last, entries into the streaming world, with PeacockTV (Comcast/NBCU), and WarnerMedia (HBOMax) to follow next year. However, the day is still only 24 hours long, meaning that all the new content is vying for the same attention, creating more fragmentation. It leaves many asking – what will the new TV ecosystem look like? Subscription services are currently ad-free, but there’s a big question on how much of an appetite consumers have to create their own “bundles” with so many standalone options. While cord-cutting was once thought of as a money saver, it is now a trade-off between the channels in the cable bundle vs. a personally curated streaming bundle.

    How do we measure it all?

    With the myriad options available to advertisers and consumers alike, the question becomes – how do I evaluate my reach across platforms? Many companies are proposing their solutions, most recently Roku and Innovid, which launched a combined solution currently being tested by several Innovid and Roku clients.

    It can be difficult to navigate the changing video landscape – to determine the right balance between scale and targetability. Here is some advice from ECI Media Management’s experts:

    • Establish clear Reach and Frequency goals, and put in place a standard for measurement
    • Be clear about target(s) and ensure your agency is prioritizing goals when putting together plans; keep fragmentation in mind and make sure your media mix is broad enough to adequately reach the audience, building reach and not just frequency.
    • Ensure you account for transparency within your agency agreement, as more media dollars are allocated to principal agreements.
      • Most of these principal-based buying situations are done as a service to clients, offering flexibility. However, a lack of transparency requires a great deal of trust, as clients do not fully know where, or even when, their ads are running.

    Image: Shutterstock

  6. Is Netflix ready for the launch of rival platforms?

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    Make or break for Netflix

    A couple of weeks ago, Bank of America Merrill Lynch told clients that Netflix’s Q3 figures, out later today, would be ‘make or break’ for the streaming platform, and would indicate whether it would be able to effectively compete with new rival platforms from the likes of Disney and Apple. It’s been a difficult few months for Netflix – its share value has plummeted by nearly 30% in the last three months, and subscriber levels fell short of the company’s own guidance in Q2. Whether those subscriber levels have recovered will be of particular interest in the Q3 results – and investors will be looking for signals that they can retain that recovery as competitors launch their streaming platforms.

    Who are the competition?

    So what does the competition look like for Netflix? Apple and Disney are launching their streaming services next month: Apple TV+ on 1st November, and Disney Plus on 12th November in the US, Canada and the Netherlands, with other markets in the months afterwards. This makes strategic sense, particularly for Disney, as it can piggyback on the marketing for its big-budget holiday-season films, and Netflix has shown over the last few years that it gets its biggest viewership in the last couple of months of the year. WarnerMedia’s HBO Max and NBCUniversal’s streaming service will be launching in early 2020. So Netflix’s battle to keep its subscribers loyal – and grow its customer base – starts now. Convergence Research Group, which tracks the streaming industry, predicts that its 47% share of the streaming market in 2018 will decrease to 34% by 2022, as reported in an LA Times article.

    Original content will be increasingly important

    This decrease will in part be down to the fact that Netflix will be losing some of its most watched shows to its competitors: ‘Friends’, for example, will go to WarnerMedia’s streaming service in early 2020, while ‘The Office’ will be shown by NBCUniversal from January 2021. With adults spending only around 30% of the time they spend with Netflix watching Netflix Original content, it looks like this could have an effect on Netflix’s subscriber numbers.

    However, Bank of America Merrill Lynch told investors that he believes Netflix will have time to ramp up production of original content while its rivals work on building their subscriber bases. This will means that Netflix will need to continue its huge investment into original content – this year it is estimated to have spent around $16 billion dollars, and Pivotal Research Group estimates that this will have climbed to a giant $35 billion by 2025. This needs to be funded from somewhere and Netflix’s capacity to raise subscription fees – its fallback option to date – will be stymied by increased competition. Netflix could also consider increasing its debt, introducing ads, investing in innovation (such as the ‘Bandersnatch’ episode of ‘Black Mirror’, where viewers could choose what the main character did next), or harnessing the vast wealth of data they have on what people like to watch, and where.

    A core part of the streaming bundle?

    Netflix’s choppy year has made investors a little nervous, which is why so much rests on the figures that it is releasing today. But many think that things will be ok. Mark Mahaney, lead internet analyst at RBC Capital Markets, for example, told CNBC that most people will want to use more than one streaming service, and it’s likely that that will mean Netflix plus another – Netflix will be a core part of the bundle. He believes that Netflix has the scale advantage and better brand name, content, global distribution and partnerships than its competitors, which bodes well for the future. Time will tell!

    What does this mean for advertisers?

    TV is still a crucial medium for advertisers, but with viewers having more and more ad-free options from the new streaming platforms, it will become increasingly difficult to reach their hearts and minds. What’s more, they are likely to be less forgiving of higher ad loads on the ad-funded free-to-view channels. This means that the most effective media channels will likely become more expensive, and the wise ones may well have fewer, higher impact ad spots for which advertisers will pay a premium. Furthermore, the growth of addressable TV will allow for more targeted and therefore more engaging ads, and lower levels of rejection by the consumer.

    Image: Shutterstock

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