Netflix Should Sell Ads
stratechery.com
stratechery.com
If Netflix at the same time increased the cost of a "non adverstiment" product that is just adding insult to injury.
I have structured my media consumption such that I rarely see any ads, and never any tv-ads.
If find them painful to watch in a real sense of the words.
That means I have dropped a lot of services/products/venues/channels but I have never missed them and certainly not to a degree that would entice me to return.
When I visit someone who has the telly on and it runs in the background I have to grind my teeth and try to find some solution to turning it off.
A dentist I no longer see did an "upgrade" of the office and got TVs mounted in the ceiling and headphones. As the doctor was drilling away having fun, I was supposed to relax, watch tv and have fun.
The drilling was less painful and annoying than having to watch ads every 5 minutes. Closing my eyes was a good option but still the headphones.
My new dentist has logic and math puzzles that he or someone he knows has hand drawn artistically on a big sheet of cardboard that he then attatchs to the ceiling.
This is so much better in every way.
It is also a lot cheaper and better for nature.
I have asked him about tvs and thankfully he has no intention of buying any. He changes them out once a month I think
In my own spaces, nothing with a logo is allowed to be displayed. This makes for a significantly better feeling space. In the past, people have walked in and made comments like “it feels so good in here!” — I attribute it in large part to eliminating the nonstop psychic bombardment of advertising.
When buying new products, I go to significant lengths making sure the item has an ad that can be managed. If I cannot find a product with a logo that’s easily removable, I do not purchase for the most part.
If a streaming service shows an ad to me, it goes off or I leave the area. It is simple.
Other people do not have the right to intrude in my cognition against my will, ESPECIALLY these gluttonous people running megacorporations. They are reducing consciousness for a quick buck against our will. Put another way, they are injecting their ego and greed into anyone possible against their will. I find it to be a type of psychic assault analogous to certain depraved physical assaults relating to self-propagation.
My intuition says ads make us dumber, more compliant, poorer, worse thinkers, more impulse driven, and more subject to external authority; among other pacifying and stupefying impacts. It is a disease worth fighting against.
I've become physically allergic to ads, anywhere. The way they are done reminds me of those drawings showing some nasty fugly stuff being squished into consumer's brain.
This causes minor issues sometimes when we visit some friends and they have a TV blasting all the time, with their kids being fairly addicted to general media consumption. Anytime this happens and I see how they are glued to phones or consoles is a stark warning about choosing different path for my small kiddoz. Such a path you can lead them on by example.
The amount of time we have thanx to this to spend on more important matters in life is non-trivial.
But look at TV/radio broadcasts. Look at the streets you walk on. The websites you browse. It's literally everywhere, and its only purpose is to catch your eye to make you feel like you need to buy stuff. And they will stop at nothing to achieve that, including making you feel inadequate or abusing your weaknesses.
And in the last 15 years, we've let these unscrupulous people gather all sorts of data on who we are and what we do, which they use to target us with the ads that manipulate us the best.
That is what sounds crazy to me.
Preaching to the choir, I know. It amazes me that most people don't seem to care all that much. I wonder if we're just overly sensitive to interruptions and manipulation.
I've already dropped 1 streaming service (NowTV) for forcing me to watch trailers before the shows I actually pay to watch.
I'm considering dropping Prime for the same reason. With Prime you can at least skip trailers but why can't I just opt out of the bloody things the first place?
Auto-playing anything is tedious annoying. Auto-playing, _unskippable_ anything is an abomination in my personal opinion and not something I will pay for.
That would allow you and others who feel similarly to continue watching ad-free.
Now, a bunch of competitors show up and they just don't care about the environment. They dump all the waste on their neighbors. Their products cost a less than the main company, but they give you a "green option" where you can pay a bit more to offset (some) of the externalities.
What you are proposing is that the company goes down in their principles to compete with their toxic competitors. For what?
You work with ads at Google (aka, the biggest mind polluter there is) so I understand why you might think otherwise.
Netflix to make more money out of nothing.
“I am going to cancel if Netflix splits disc from streaming.”
“I am going to cancel if Netflix raises prices.”
“I am going to cancel if Netflix makes it difficult to share passwords.”
“I am going to cancel if Netflix cancels my shows.”
“I am going to cancel if Netflix introduces ads.”
Netflix did more to free the market from the stranglehold the networks had for decades. If you want to go back to paying $150 per months for cable, be my guest. People seriously have issues with Netflix raising prices 25-30% in the past DECADE while their catalog has increased significantly?
Me being one of them for I think I'm about to hit the 2 year mark soon on being sans-Netflix.
Any show I like and publicly does well, cancelled on season 3. Shows that have been popping up are utter trash. I was thinking of doing a month when Cowboy Bebop dropped... yea... I'm glad i didnt. I'm waiting for Witcher season 3 to drop, then I'll get it for a month and cancel it.
Their business practices are staying from, "deliver awesome content in an awesome way" to "squeeze blood from a rock".
Back in the day, Marco Polo was their shit tier show and it was awesome. The netflix exclusives that were coming out 2 years ago were trash and I could see the writing on the wall that it wasn't going to get better. What I hear about lately, it's all a fucking joke. They're hitting the theres a quality in quantity mindset and the numbers are showing that it's not working.
Maybe if they placed more focus on good movies and shows instead of the business models LITERALLY EVERYONE RAN AWAY FROM TO GET NETFLIX IN THE FIRST PLACE... they might be complaining that there aren't enough good writers and filmmakers out there because they already bought up everyone. That's a better and much more respectable problem to have instead of being a silicon valley bro who worries about "scale" during every conversation.
If there was an ad free service, where you can easily watch ANY tv show or movie when you want it, I'd pay $50+/month for it.
Part of the reason cable is/was so expensive is that you wanted more than one channel so you could see shows on other channels.
Netflix is now just s channel, HBO, Amazon, AppleTV (whatever they call it),Disney. Want to watch Boba Fett but still follow a show on Netflix, now you are paying for two channels. (and so on).
Of course you can rotate, Netflix one month, Disney the next, but by spacing out release to once a week, they can hook people into subscibting to several streaming services.
Not all is bad, of course, but I quickly run out of good content and if I see something I would like to watch later, it is often gone by then.
Then I can search for it, only for Netflix to show me a bunch of irrelevant stuff not even close to what I was looking for.
but we don't have any obligation to keep supporting them it they f*ck up
Why not take the revenue they have and provide a good, sustainable service for that income? Why does it always have to be growth or bust?
But the engineers aren't the only ones who are paid in stock - so are all the executives. And they want money! So you must keep the growth up. So at this point you do what Netflix is doing - start exploring other markets that you can use your existing skills to dominate. Now most likely that will fail, because by nature, you're taking the money from the home run you hit and betting on hitting another even bigger home run. For every 1 Netflix there were 10 failed competitors. But Netflix now has to try and be another Netflix, but will most likely spend their money creating 1 of those 10 failed competitors.
Netflix is just a movie service. And it is a movie service that hasn't gotten any better for a very long time. The fact that I have to spend a lot of time finding content to watch and Netflix mostly showing me the surface layer of content over and over again is extremely frustrating. It just isn't a good experience. They are about as frustrating as every other service on the market because they deliver an experience that isn't anything special: it is just as bad as every other competitor.
If they have no ambition to deliver a better service than everyone else, then why would they attract more users, and more importantly, have more users pay more for their service?
Right now Netflix is an acceptable service, but nothing more. They still have some way to go on quality. And if they started becoming the company that dares to do things a bit differently, and to do things better, this could be a platform to launch into other areas.
Perhaps you picked up two bad examples. Google search is worst than ever (for their users ofc, not for the ones who get money out of it). My experience as a customer in Amazon is equally bad: bad quality products (I have to spent hours filtering and double checking in order to say "yes, that's the item I want"), reviews over 4.0 that nowadays mean nothing, intrusive ads everywhere (e.g., I searched for boots in Google image search, and suddenly all the ads in other websites are about boots sold at Amazon).
I used to trust Google (I bought domains from them, used Gmail, I even bought their Nexus 5!), but not anymore precisely because how big they have became: almost-zero human customer support, they can ban you anytime they want and give you zero reasonable excuses.
But is that even the right thing to be doing? I'd argue Netflix would be doing a hell of a lot more for it's share holders to take the profits from the successful business they've built and hand it back to shareholders, rather than start gambling that money on building new businesses that are unlikely to succeed. This is what's happening right now with Facebook. It's a social media company gambling share holder cash on becoming a completely different business with almost 0% chance of success.
They are also working on growing into at least one new area, video games.
If anything, one of the best forms of competitive market capitalism is when a company that's successful in one sector, invests in entering a new one, thereby adding competition to whatever that new sector is. Shareholders get more growth out of the company, consumers in that sector get more competition for their $, win-win.
> But the engineers aren't the only ones who are paid in stock - so are all the executives. And they want money! So you must keep the growth up.
This might be why so many (not all) great software services and products eventually turn into crap. They start out focused and well made, caring about their users and workers. Then the owners and decision makers try to squeeze everything out of it and carelessly add bloat, while "optimizing" internal processes into oblivion. And all that because some people simply cannot get enough stuff, is a business' goal always to extract value and power for the few despite already having massive market share, a good name and happy customers?
There is another path: invest in the long term by putting workers and customers first. Give back, invest in R&D, education, open source, social stability, the _quality_ of their product, growth of their workers and relationship with their customers.
If this was the common path of successful companies, we would live in a different, fairer, more sustainable advanced society.
I'm sure it could have been handled better, but elegantly transitioning out of hypergrowth is a surprisingly hard problem, even when you recognize it as such.
I was under the impression that Netflix generally doesn't offer stock to engineers, but instead pays above market salaries.
I’m not sure if you’re aware, but humans are of the biological class mammalia. We are nature.
If we’re nature, then everything we do is natural.
Unless you want to enshrine Netflix’s market position in law, Companies, like species, will always compete with each other.
Companies in our civilizations, like species in our forests, will expand until the limits of TAM or outcompetition by a predator company.
It's greed. Investors want to make more money, they don't care about the product, or the experience in using the product. They just want more money. That's how the whole system is set up. It's sadly just how it is.
During those years the founders and much of the talent are very likely to leave the company. Partly because working for an enterprise wasn’t what they signed up for, but mainly because the rapid growth has likely stagnated, which means that you can get so much more out of your time building something new.
Your time is limited and how you get to spend it is directly tied to your wealth. Why would you waste either on something that doesn’t grow when you could be growing your wealth 40% a month on something else?
Maybe it’s greed, but it’s also how you play our system.
The only weird part about it all is why we aren’t teaching children financial impact and how to maximise it in schools. I mean, I had no idea how rigged the world is until we had our first million (in Danish KR, so around $150k). Simply being able of putting down 30% on the loan for our house ourselves means that we have around 10k DKK ($1500) more to ourselves, every month, compared our friends who are similar places in life minus the start capital and thus are paying those $1500 directly into the banks pockets.
Or do you just not want to see it?
Plenty of good managers and engineers just want more money too. Once the hyper-growth stalls, many early employees cash out their lottery ticket and leave to take higher-paying jobs elsewhere. They don't care as much about maintaining the product and experience that they built as they do about making more money.
(And this is exacerbated by the fact that many people prefer building new things than to maintain the existing things they built.)
Not only that, but perhaps the world would be a lot less.
No its a byproduct of human beings.
> Disincentivise the pursuit of constant growth, and the world would be a lot less evil.
Or actually it would be much worse.
If they do not do so, odds are big - but no given - that a competitor with a enormous bag of VC money might enter the scene and subsidise the losses like any other platform gameplayer does these days, that might undercut the incumbent in quality and slowly but surely garner enough market share to start flipping the coin, and the process either resets itself or doesn’t.
One must be constantly on top of the game to remain at the top, being handicapped by fickle things like principal values and the like.
I wish there was a combination of ngo and corp that focussed on solving the problem with the aim to dissolve oneself when the problem is gone, instead of becoming the problem.
The only thing that sometimes prevents it is when holders are emotionally attached (old family stock or brand fandom) or when holders have a strategic need to prevent certain control scenarios (often nationally flavored).
So why not provide a sustainable service? Because it's not valued in the market.
But of course its valued far less then a growing company.
This seems to be fairly basic and totally logical. Stock market is forward looking. If your future it the same as present that fine but it means over time you shrink relatively and you are likely not robust against paradigm changes.
I think I even remember hearing him say in an interview that he would be happy to just keep the current number of subscribers and make it a more focused product.
That matters because there was a time when it seemed to be turning into just another social network. At that time the major new feature seemed to be "inspirational blog posts". That's not for me.
For about a year I cancelled my subscription but returned when the focus when back on providing useful features like route planning.
I wish that Netflix would just concentrate on providing a better experience and better content instead of degrading the existing experience even more.
The closest one was Crunchy Roll I think, and that was only possible since they were essentially pirating their content if I remember correctly. In the end, even with piracy it wasn’t sustainable until investor money came into play.
Shareholder Value.
Assume for the sake of contradiction that we the humankind decide not to incentivize companies to chase growth. This would mean the humankind is enabling a company to sustain its current position with existing assets and operations and nothing new. Since the company has no incentive to grow (introduce something new), the rational company will not create new additional value. Since the company is in a market dominant position, no new entrants will be able to create new additional value.
Curious to see if others see any ways to protect the interests of the humankind while taking away the incentives for market dominant companies to continue to make progress.
Netflix is the only big streaming service that relies on streaming as the only source of revenue. Netflix has to spend huge sums every year on new programming to keep subscribers. Disney/Hulu/ESPN/Hotstar, Amazon, Disney, Apple, Peacock, HBO Max, and YouTube plan to make deep cuts into Netflix revenue in the future.
Relative growth is the ultimate leverage of power.
And while you think that might be some line or something it isn't. In the early 2000s banks basically did that, if you played it easy one that geared up more simply bought you up and they all went big into MBSs
There would be nothing wrong in Netflix say: We're no longer able to buy the shows and movies we'd like, because the studios are setting up their own streaming services. We now going to shift towards creating less content, but higher quality.
As I see it, one of Netflix major problems is the quality of content. They can't buy quality content anymore, so they're attempting to just make as much content as possible, hoping something will stick. Writing have been a major problem for Netflix for years. They're able to create an initial good season one of a show, but are never able to deliver in the following seasons.
Personally I don't see the problem in Netflix becoming a niche player with their own high quality content, that could allow them to lower prices as well. It's only a problem because their shareholders overpaid and insist that Netflix remain a major streaming platform in order to recover their investment.
You are aware that shareholders the owners of the company right?
Sure you might not care if Netflix becomes niche, but you have like 15$ a month of skin in the game. Not million or billions.
There are limited humans on this earth and if you consider, that you cannot reach them all and there is also competition, which realistically also takes some of the market, why not be fine with reality and a saturated market you cater for well?
because they borrowed too much money that they need to pay back.
In credit to YouTube and Hulu, they give you the option to go ad free, or in the case of YouTube pay nothing at all. Have cheap price and ads, or pay a little more and get the ad free experience. I happily enjoy ad-free Netflix, YouTube and Hulu.
> I think this would break their brand and is more short-term thinking, i.e. "how do we increase value in the next quarter", rather than long-term thinking of how to keep growing as a company.
If you have read the article and try to respond to the authors points more directly, he is making a pretty compelling case as to why this is not short term thinking at all - subscriber growth is effectively over for the company now in the near term, there are little new customer households left to sell a subscription to for Netflix, which is of course why we are seeing more frequent subscription price rises too. On the contrary, he is laying out a long term strategy that may still deliver growth, something subscriptions increasingly won't as subscriber growth continues to inevitably fall.
As YouTube and Hulu both prove, one can have ad-supported and ad-free subscription tiers on the same service, and I suspect is likely the path Netflix would follow if they pursue such a plan in future. While as an individual you may not like ads (thats fine!), the slow down of subscriber growth at Netflix is pretty clear and will require a response from the business, which so far has been price rises...
Netflix has barely tapped its global potential (partially more and more users of countries come online world-wide), and many companies have experienced what they call "demand pulled forward", i.e. extra growth in pandemic that then falls as pandemic heads towards a close. This is short term, and he has assumed that the slow in growth is the "inevitable decline" of Netflix Subscriber growth.
Also, to be clear, I think Stratechery is an incredible source and usually agree with him. I don't in this case.
I wasn't trying to respond to his points more directly, I was taking on the perspective of what is good for the companies growth.
Just because you "happily enjoy ad-free Netflix, YouTube and Hulu." Doesn't mean most do (and there are strong statistical reasons that indicate that others enjoy it more as well).
The problem with this argument is it is not thought through. Expanding to newer markets is not about simply enabling credit card payment from those countries.
The performance in India (not good) proved recently it is about localizing the content. Creating or buying new content for these new market costs money, and then managing those (staffing up local orgs, local production center, data center, etc.) also costs.
Netflix is in content business, unlike software it is not about making copies and distributing world wide at zero cost.
You're correct it is a content business, they just spent 17 billion on new content, far more than any other streaming provider (and have the subscribers to support it). Specifically in India, with Indian creators, and it worked. It's in their book "No Rules Rules".
can't companies continue to exist on the number of subscribers that they have?
can they not reduce costs -- while continuing to service that # of subscribers -- to generate better returns for their shareholders? would such actions cause shareholder/investor revolt?
why?
> the slow down of subscriber growth at Netflix is pretty clear and will require a response from the business
how far does this go? when google or amazon or netflix or whomever has an active user account for almost all human beings on the planet, what then?
why DOES a business need to respond when their subscriber growth has passed the nadir for given market(s) at given tiers when the ROI for that business at those tiers and market volume is ~20% per quarter?
are those returns not enough? if the company (Netflix) could keep existing revenues at existing customer volumes while also reducing their infrastructure/delivery costs, would that not be enough??
would they NEED more customers?
why?
If you are not constantly growing then you will not have everyone with you, this is because new people reach adulthood. You want them in your service while still retaining the older ones.
In a steady state when all old population have your service and new ones are automatically adopting it, then you are a public utility (Ex. social security).
And when you are a public utility or essential service then you don't have to market yourself, it becomes money printing business and it is dividend company and not a stock growth one.
In the US its $12.99 right now, and has been around a while: https://help.hulu.com/s/article/hulu-no-ads#hulu
They also have a $6.99 sub that does have ads, which may be what you are thinking is the only option? https://help.hulu.com/s/article/how-much-does-hulu-cost
To my knowledge no one can watch Hulu with ads and no sub like YouTube - all plans have a subscription, you just pay more to remove the ads.
Not entirely, though, for YouTube because paying doesn't remove the "And here's a word from our sponsor" segments that people are now using instead of ad breaks, right?
Unless something has changed and I'm unaware, this is not entirely true for Hulu. I've been paying for that plan for years and they definitely still play ads for select shows.
Edit: I think it has something to do with it being a network show that Hulu hosts the day after it airs on cable, or something, but they're definitely still there.
Yet for some reason regarding business and economy unlimited growth is the holy grail.
Regarding the topic: Sure, do it... I'll gladly move on to some other service. I may be one of the few people actually doing this, but worry not, I don't care for what others do with regards to my decisions.
Apart from that there is more and more content on Netflix I am not even slightly interested, all that reality show bullshit that creeps in... brrrr
Availability issues are often because companies have paid big bucks for long term distribution rights within a geographical area. In this specific instance it could also be Paramount screwing you over like Disney did when they launched their own competitor.
Years ago, my Netflix subscription drastically reduced the amount of shows I pirated. As the streaming industry started to develop and more and more studios pull their content or try to get people to pay for their own special Netflix, I'm finding myself using Sonarr more and more.
Like Steam and Spotify, Netflix solved the accessibility and availability problem. Now the media industry is trying its hardest to undo that and make steaming unnecessarily burdensome again. Their short term profits are ruining their business model once again and when this system eventually collapses, the media companies will complain about piracy once again.
Netflix in Germany sends audio in 64 or 96kbps for stereo and 192kbps for 5.1
Video quality is just as bad.
Also the issue with some shows not being available in some regions is a licensing problem. You need to take that complaint with the studios rather than Netflix. They would much prefer to do away with the problem of localized licensing deals.
Are there any in other regions? Can you give some examples?
Also this has nothing to do with codec; Netflix doesn't send anything using MPEG1, as it's an old, inefficient codec.
But...
They should play them after you've watch an episode of something, and the "Play next episode" button should immediately skip the ad. The ad volume should be normalized to the same as the episode (or lower), and the ads should have to match the same production specifications as Netflix shows. They should be like small, very short, unobtrusive films that advertise something.
So long as I remain in control of what I'm watching, I don't have to watch an ad to access content, the ad is high quality, and the ad comes after the thing I chose, then I'd accept ads on Netflix in the same way I would accept a trailer for a Netflix show.
I imagine that bar is probably set too high though.
Similarly first time I see a youtube ad, I'll cancel my youtube premium subscription.
If anything the need for piracy or ad blocking led to a lot of people learning tech skills they would otherwise be completely uninterested in.
Netflix already contains advertising, btw. Its content does, such as product placement (a good example of which being Nokia in the original The Matrix though not Netflix specific). Heck, even Disney+ is advertising: for their merchandise. My kid digs 'Mini Mouse'.
What I am not interesting in is wasting my time on ads. I sort of accept it on Prime because I got Prime cheap, and its Prime Video products only. They're testing my limits though, I can tell you that much, and I can also tell you the ads are usually not appropriate for me (although I do have Prime for the Prime specific content, I find it on my own). The moment Netflix starts to waste my time with ads, it becomes less valuable. Because ads is the reason I avoid cable TV. I CBA with wasting my time on BS I don't want (to see). Its the reason I got Netflix in the first place. It makes the product less convenient, and pirating is already very convenient. It just feels better to pay for something while watching the people you paid for acting.
If I have to reach for my credit card to view your content, you have to put the ads away. There is no in between for me. If you pull out ads on me, I will drop your service.
Youtube has ads for the lower tiers, yet you’re still subscribed.
This article is explicitly not arguing that Netflix should show ads to existing subscribers like yourself.
You can turn off auto-skipping to next episode, but depending on the platform you are watching on, it might still autopay trailers after a movie has finished.
In your situation I'd use the sleep timer setting on the TV itself to automatically turn it off after a given time. It shouldn't be too hard to align it to match the end of the show.
the job of Netflix is to provide a product its customers want. i don't think OP is in a tiny minority of people who want an option to disable autoplay; it's a desire i've heard expressed quite often. hell, fucking YouTube, a service that exists to play ads and that plays more as you watch more videos, has an option to disable autoplay
Netflix gets away without doing this because it doesn't immediately lose them customers, and implementing it wouldn't really gain them any, but i am always quite at people who declare that it's therefore good. i need to figure out some tech service that's growth positive as a function to sacrificing its users' children to Moloch, just to watch the HN crowd cry "well, it's not the service's job to /not/ sacrifice your children to Moloch, and you can put them in an anti-Moloch safe room, so I personally don't see why they shouldn't keep sacrificing to Moloch the children of those that don't bother to go the extra mile to avoid it"
Most sleep timers works in hours, maybe half hour increment. Looking up the length of a show, estimating when Netflix will interrupt end-credits, is completely unreasonable workaround.
It's like the income tax. First for only the wealthy, then the tax "trickles down" to everyone.
"In this world nothing can be said to be certain, except death, taxes and ads."
It's difficult for me to see Netflix as being any different. I'm already not getting that much value from the service, so why should I pay if there where ads?
One fact which is often overlooked in the non-US markets is the lack of ads. For a service like YouTube, it's the same five ads over and over. There simply isn't enough inventory in the ad space to supply something like Netflix.
You pay for electricity and TV companies have never compensated you for the electricity used during their commercials.
There are lots of occasions that we don't get compensated for things that have costs. For example, let's say you're driving in traffic. There's a stop light. Two cars from the other direction turn onto your street after their light has turned red ("it's been yellow for 3 seconds, but I don't wanna wait"). Your light turns green and a couple cars get through, but you have to wait another light cycle because of those two cars that illegally ran the red light. That's another minute or two of idle fuel usage. You don't get compensated for that and what the other drivers did was illegal. At least with Netflix you'd be agreeing to the ads and a price with a very real option of just not subscribing.
There are so many things that you pay for that you don't get compensated for in that micro-accounting way. Heavier vehicles destroy roads requiring them to be repaved a lot more, but the drivers of those heavier vehicles don't pay for that. We all do. It costs way more to deliver things to people in rural areas, but the USPS and many online stores will charge the same shipping for someone in Alaska or rural Montana as someone in NYC despite the fact that the person in Alaska might be only accessible by air and the person in rural Montana might be the only person receiving a package for 5 miles. They might be using $1 worth of fuel just on the end delivery for one person in an area like that, never mind the amount of time that it takes to deliver the packages in such a rural area. ($4/gallon of gas, 20 MPG fuel economy, and a 5 mile distance would be $1)
I'm not sure what your situation is (maybe you're on a really bandwidth restricted connection like HugesNet), but "we consumers pay for the bandwidth" is probably one of the smallest pieces of this world to worry about getting compensated for.
>...it would create a new benefit for those willing to pay (i.e. no advertising for the highest tiers).
If they kept the existing $10/$15.50/$20 plans the same (https://help.netflix.com/en/node/24926), but they add a $5 ad-supported subscription, that's not changing anyone's experience, unless they choose to switch.
How those changes shake out is hard to predict. It's not a stretch to suggest that even little things change for everyone though. Adding ad revenue changes how a company thinks about nearly everything, whether they're aware of it or not, and ultimately the end user suffers.
For example, Netflix would likely start trying to tweak content discovery in a way that benefits advertisers. Rather than show me content that matches my historical interests, they show me content that optimizes ad revenue as well. It's unlikely they'd maintain two different "ad-free" and "ad-full" recommendation algorithms.
Motivated by pressure from advertisers, Netflix might be less inclined to produce or provide content that made advertisers uncomfortable or benefitted an advertiser's competitors.
When producing content, they now have two bosses: subscribers, and advertisers. Both have entirely different expectations. Those expectations push Netflix into making compromises, and rarely do those compromises produce outcomes that are better than if they only focused on making one side happy.
It's just more nuanced than "I don't want to watch shows with ads".
Nevertheless valid I think. In subscribing to Netflix (or continuing to do so in my case) the absence of ads has to be one of the considerations.
Now, presumably, Netflix doesn't take a cut of those today. Wouldn't be a stretch to imagine using product placement to offset the cost of producing Netflix Originals in the future, though.
The people who can afford the tier without advertising are exactly the people advertisers want to target.
1) Advertise "ad-less" platforms to them that contain subtle advertisements for expensive but effective ad-blocker systems - even augmented reality systems that can block most billboards etc.
2) Have a controlled arms race where ads get even more egregious and bypass the old ad blockers. Sell new ones etc.
3) Add really powerful, comprehensive features to ad blocker systems that absolutely beat all the ads, but they only perform well when integrated with new, up-to-date apple and tesla products.
And there are also people who will go back to using BitTorrent to not have commercials.
I wonder how the economics will work out there?
I'm currently paying for 4 streaming services because of how they've siloed various shows off. It'd probably only take one of them to start playing shitty broadcast tv style ads during things I'm watching for me to rage quit them all, and go back to downloading everything I watch and using shared Emby servers between a few friends.
I hate the advertising industry.
Advertisements are a service-killer for me, and when that happens I'll also share my ad-free files with everyone I know.
If Netflix had ads on top of the monthly service charge I'd cancel immediately. I stopped using YouTube on any device other than my Linux box where I can adblock everything.
It suggests that Netflix should offer an ad-supported plan for people unwilling to pay current prices.
Why couldn’t they keep existing subscribers ad-free? Those people are currently paying huge subscription fees.
Why would it be impossible for Netflix to implement advertising in the way this article suggests?
Second, why? Why would this be bad for the Netflix consumer. Consumers willing to pay current sub fees shouldn’t be affected, and those unwilling to pay current prices would be able to access Netflix for less money.
This would obviously benefit consumers with less disposable income.
Sadly, Amazon has the right idea here. Prime Video is (effectively) free, and a big chunk of the premium back catalog sits in IMDB TV, where ads are mandatory.
I understand content generation is expensive. Maybe Netflix needs to expand more on the IPs they currently own? Merchandising and such (how about a LEGO/Stranger Things crossover anyone?) Differential pricing models for other countries would make sense too. I’m sure the board has thought of all of these and none are particularly easy, but putting ads where they don’t belong would ruin their brand.
Honestly what I think they should do is add micro-transactions. Introduce netflix points, which can be used to do things like skip the wait on shows released weekly. Watch new netflix movies ahead of the rest of the subscribers, etc.
The marketing challenge would be to pass it of as getting perks instead of penalizing the rest of the subscribers, the easiest way to do that would be to include a small number of netflix points in the standard subscriptions.
It could work like you can watch up to episode 5 this week and wait one week for episode 6 or pay 1 netflix point per episode to watch the rest now. You can buy 1 netflix point for 1 dollar and everybody gets one every month as part of their subscription.
Thanks I hate it.
The issue is, that at this point in time, Netflix will become a greedy data monster like Google and try its best to profile me to "improve my ad experience". Thanks, but no thanks. VLC does not profile me when I watch a pirated show.
Oh and you don't need to pay silicon valley software engineer prices to do any of that.
The lack of ads is the #2 USP after good content
Same holds true for the Internet. In the 90s, there were 1-2 banners (animated GIFs), tops. It also evolved into intrusive tracking ads with flashy videos, sound etc.
My thesis is: Because you always get used to the ads and start to sub-concisely ignore them, they get more and more obtrusive to counter that effect. Its a race to the bottom, and my observations that I described above back this thesis.
- The app on my laptop will stop working when I move it to my big screen over miracast.
- The content here(UK) seems very limited, I feel I have watched everything watchable.
- The video quality in the browser is shit.
- It feels like the UI is fighting against me when I am trying to find content to watch (this might be because there is not a lot of content).
If they add ads I will just drop them on the spot.
There are two main reasons for this:
1. They waste my time 2. It encourages the further invasionsions of technology tracking
The first one should be relatively self evident. The second is more isideous, and one that I'm more concerned about in the long term. Streaming services selling adds will mean the creation of technology to further push tracking of whomever is view the content into the devices that they stream from: computers, tablets, phones, and TVs.
When I'm watching a show after a long day at work, I don't want to have to worry about whether my TV is tracking what I watch, etc. This technology is already being developed by smart tv manufacturers, for example, and already exists for the computer devices. And while ad brokers and clearinghouses definitely want tracking technology in every aspect of our lives, I'm getting fatigued by it all and want some portions of my life safe from the collection and sale of that information.
If I'm the product that these companies are selling, and the shows I'm watching are the "bait" to get me to agree with that (this is what print media became), then don't charge me, and tell me that.
Not to mention the clickbait title.
It’s in the title
> Not to mention the clickbait title.
Why do you think the title is clickbait? It accurately reflects the contents of the article.
And to reiterate what many have already said, this perpetual growth and scale mentality is so so toxic.
Of course, that's also the same logic that hundreds of tech companies have already "figured out" about ads. And it always ignores the knock-on effects of ads seeping into other price tiers, of ads taking priority over other features, etc. etc... that eventually destroy entire platforms and pieces of software.
Just as a thought experiment - how many people currently subscribed would be subscribed for 30+ more years if they could just maintain what they have been doing for 30 years? The potential lifetime revenue is so huge it is a shame any time they do something that makes a lifetime subscriber bail on 30+ years of subscription payments without a second thought.
It's like they have the fish on the hook and they're debating if they can catch more fish by cutting the ones they have loose.
Here are some ways I think Netflix could make money just off the top of my head,
* Netflix Live - Amazon does this to an extent and there's clearly a demand for live content. This could be sports, or a Twitch competitor or something original (reality tv meets live maybe).
* Pay for different regional content - Every VPN advertises the ability to switch countries to watch Netflix from a different country. I would happily pay more if I got access to the US content in addition to the UK. This is a legal problem more than an engineering problem though.
* Netflix Infra - every company out there seems to be creating a streaming service and frankly most of them are rubbish - they constantly buffer, have terrible apps and casting functionality. Netflix could create a product similar to AWS and rent out their infra. Yes it does cannibalize their own offering/product strengths but thats happening anyway as their competitors get their shit together
* Merchandising - there are a lot of crazy viral hits that Netflix seems to create - Squid Game was one of the most popular Halloween costumes last year. I should be able to order merch right from the app especially for Netflix originals. You only have to look at Disney to see the possibilities here.
I heartily disagree. Ads are a reason to cancel, so that entire point can be put to the side. While the user experience is vastly different between streaming services. Also, the uniqueness of content is a double-edged sword. Netflix has focused on content that pushes boundaries, which is great for some people, but not all. But I digress. The point I was heading towards is that UX is the weak link in stream right now.
Good points of a streaming UX are/would be:
- Being able to restart a show exactly where you left off, and easily find it.
- Navigation being as easy on a roku remote as it is with a mouse and keyboard, including searching.
- Reliable buffering and streaming.
- Closed Captioning, especially if you can configure font size and placement.
- Ease of navigation of all the content.
- Good recommendations of what you would actually watch, not what they are pimping that month.
- Accurate representations of what is new and popular.
I'm sure the list could go on. But no service has nailed the experience yet. They each have their strengths and weaknesses. It is time for streaming to mature - to figure out how to make the experience as good as it can be, step up, and take a leadership position based on just how awesome it is to work with the product.
Options for their next move essentially boil down to:
(a) expand into "other bets" (e.g. games)
(b) compromise on the quality of their product and brand by selling ads to gain incremental revenue
(c) give up on growth and be happy with a large, sustainable business
They are openly pursuing (a), which is the ideal outcome. Ideally they can even launch gaming or some other form of entertainment as a separate subscription, helping to diversify their revenue.
I see (b) as the backup plan. If they're not able to diversify into another revenue source, their next best bet is to compromise their existing product and extract the final bit of juice using advertising. Some number of customers will drop down from paid to free, and that number is difficult to model. Netflix could also end up shooting themselves in the foot by introducing ads, if that convinces the whole industry to do the same. In the long run that will reduce margins for all.
Finally, (c) isn't compatible with the type of capitalist society we live in. Sometimes a company has peaked and that's OK.
I would say no because:
Having all your costumers pay a monthly fixed price is the most comfortable and reliable way to earn money. Adds revenue is based on how many people see it, which is not known if have bunch of them in front of a TV, depends on the day of time, what is shown and so on...
Adds dictate what you can do. Ever heard a YouTuber say "I can't show or say this or I get demonitized"?
That would happen to Netflix too. And Netflix is an international company, showing nudity in German is not a problem. Showing violence in America is no problem but cater to both and try to sell Adds for that is going to be a mess. So it would completely destroy what Netflix is content wise, and thus lose a lot of customers. Generic bland drizzle TV that sells you Soap and other crap like cable TV? No thanks
And it is questionable if it increases revenue at all. Streaming costs money. I have a Netflix account which I seldomly use. If I where to watch add based Netflix they would earn way less from me. Maybe that is the case for the average user as well. The author does not know but the people at Netflix probably do.
- A lack of broader ecosystem leverage. Apple (through devices and Apple One), Amazon (through retail delivery with Amazon Prime) and to a lesser extent Disney (via their IP) can leverage these assets to both support streaming growth and not require direct profitability.
- A lack of quality. The shovelware of content that Netflix has focused on in the last few years will be their downfall. It makes ideas such as adding advertising palatable – most of the content is crap so why won't they put ads next to it?
Apple's best picture win for CODA was an inflection point in the streaming wars. It shatters the illusion that Netflix is the premiere streaming service. Netflix is still the biggest but over time the lack of quality will further tarnish their brand and impact on their ability to raise prices.
From a content quality perspective, Netflix with ads will be compared in consumers minds to YouTube. Once this occurs, consumers won't want to pay much more for Netflix than they currently do for YouTube.
Now, said that, The Power of the Dog and Rome were two very good movies that somehow came out of Netflix. I don't think that CODA is such a turning point. All these services are pouring so much money into productions that sometimes they hit the bullseye.
I will pay netflix more than any cable company because the quality of their content.
Exploitative capitalism at its finest. Shortsighted greed with no room for imagination. I can spend 15 min and come up with at least 5 ways to charge customers more without needing to sell them ads. I don't care if it costs $0.99 I will cancel if they have even one ad and I will pay up to $2-300 for no ads (including for other users because it creates a perverse incentive to collect user data and sell anyways). You want cheaper with ads? There is a myriad of services that provide that (although the cheap part is rare!)
Huh?
I don’t see Facebook or Google going around selling user data, it’s secret sauce they want to protect. Why would netflix sell user data if they start advertising? Wouldn’t that be more likely in a world where user data isn’t otherwise a major revenue source for them? (Although collecting user data is clearly already super important for netflix as they use it to design their content)
Why would they need to sell that data to allow better targeting? Doesn’t make sense.
> That is, if they go down the ad road.
Why would adding ads to Netflix force them to do these things that they would already be perfectly capable of doing? Netflix collects tons of data, could sell it if they wanted.
For example, your bank gives you a checking account, some require you to maintain some balance or a fee applies. They charge merchants when you use debit cards too, but they collect your payment info, at some point they all decided to sell your payment info to allow companies like google to connect targeting with purchases. Why waste precious data when you can monetize it ? (At least that is their reasoning I disagree with)
Netflix won that competition by providing a simple, quality product, at a price point that, for most people, makes torrenting no longer appealing. The moment they try to push unskippable ads down the throat of those consumers is the exact point where a large bulk of them will reassess if spending 5 minutes to hunt down torrents and watch them uninterrupted is a better deal than paying for a service that stops your movie for 5 minutes to show ads.
Sure, they could go for short unintrusive ads before the show starts. But you can't generate significant revenue with that, otherwise every TV station would do it and streaming and pay-per-view would not exist.
This isn't really true. Netflix's biggest worry is Disney+, I'd have thought -- the streaming company which simultaneously has exclusivity over very nearly a controlling share of US-centric cinema/TV content and is the last to market with the most growth potential.
Netflix's second biggest worry is Amazon Video, which is gobbling up studios and franchises all over the place but is at least at this point just a component part of the nearest thing to a universal service provider that the world has seen since the fall of Soviet communism.
Rarely but Netflix produces good content sometimes and DRM won't protect it from getting pirated.
Not all product information is advertisement.
Adam Smith, John Stuart Mill, and Karl Marx all agreed on the tendency of the rate of profit to fall.
https://wikipedia.org/wiki/Tendency_of_the_rate_of_profit_to...
Youtube ads drive me nuts. I refuse to pay for a subscription for user generated content. A real paradox here. I am ok with it remaining as is. Just don't bring ads to Netflix! I am happy to pay the subscription.
Netflix exploring games and other types of content delivery is a smart move. Going from offering passive content to interactive content is not easy though. Wonder where that will lead...
The sad reality however is that an user-friendly, ad and spyware-free experience will never get the amount of investor money that the hypergrowth-driven startups get in the hope of establishing dominance followed by rent-seeking.
Netflix stomped the breath out of cable and then became the thing it sought to replace
Except that it doesn't. Netflix's business model is providing people with ad-free content.
This is just another example of the truism that there isn't anything in the world that an MBA can't make worse.
Even those small in-house ads for amazon prime are annoying, I can't imagine what real tv-style ads will do.
What would be super refreshing would be a tech company that stays private and focuses on a useful product instead of growth hacking.
- bad performance (wich indicates poor tech)
- bad "netflix" productions
- price increase
- competition growing
- lack of reactivity
the only thing i remember from netflix is their intro video, and the countless of netflix flops (cowboy bebop for example)
Almost every service I know quickly moves from the "it's cool" phase to the "get this other feature you don't need" phase just to get a 0.6% extra of growth.
So many great services are now packed with ads and useless features that just make the experience worse and filled with annoying bells and whistles.
YouTube and Reddit are just two examples, they're increasingly more annoying to use and if there were decent alternatives in terms of content I'd jump to them in a blink. Instead, for now, I just pretty much stopped using Reddit and go to YouTube only when I truly need, for how much I despise the quantity of ads and smoke they throw at you.
Instead they should open their platform to third party content, give those publishers a share of subscription revenues, and allow capitalism to work its magic.
Ignore this and don't click.
So they will sell ads. In 20 years streaming will look like cable TV.
Copy cable TV business plan and theses users will just migrate elsewhere. Way to shot on your own foot.
The title is consistent with the contents of the article. The contents of the article are not deliberately terrible, in fact they’re not terrible at all.
Classic kneejerk emotional reaction.
You need to seperate personal distaste for advertisement and objective analysis / business strategy. I hate ads as much as anyone, but I don't think the article sucks. Quite the opposite actually.
If I were an investor in Netflix, I would vote for this.