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Advertising, fees and sports: New directions for Netflix?

Luca Fontana
Zurich, on 20.04.2022

Viewer numbers are falling at Netflix. The stock market reacts with shock. The streaming giant is therefore considering ad-financed streaming and has announced its intention to fight account sharing.

For the first time in more than ten years, Netflix is losing viewers worldwide. This was announced by the American streaming company at the presentation of its latest quarterly figures. The bottom line: In the three months to the end of March 2022, Netflix lost around 200,000 subscribers. This brought the global subscriber base down to 221.6 million.

The reason for this is said to be increasing competitive pressure and Russia's war in Ukraine, where Netflix cancelled the subscriptions of all 700,000 Russians in response. The management had originally expected 2.5 million additional customers. It now predicts that the loss of subscriptions will accelerate to two million.

The shock is deep-seated, also among investors. At times, Netflix shares lost over 25 percent in the after-hours trading. Netflix founder and co-CEO Reed Hastings, of all people, reacted promptly: for the first time ever, he openly talked about ad-financed streaming and sports, after years of speaking out against it. And: Hastings wants to fight account sharing much more resolutely than ever before.

Netflix wants to change: With fees, ads and sports

How serious Hastings is about coming changes, he expressed in the video to the quarterly figures so:

«Wir arbeiten daran, Account Sharing zu monetarisieren. Wir denken schon seit ein paar Jahren darüber nach. [...] Über 100 Millionen Haushalte haben sich für Netflix entschieden, ohne dafür zu zahlen. Sie lieben den Dienst. Wir wollen einfach nur in einem gewissen Mass dafür entschädigt werden.»

The tests currently underway in Chile, Costa Rica and Peru show what this could look like in concrete terms one day. There, Netflix wants to find out how much people would be willing to pay for legal account sharing. At the start of the project, the account sharing function will cost an additional $2.99 per month. But a global solution is still about a year away from being realized, he said. That's what Greg Peters, Netflix's chief operating officer and chief product officer confirmed to online industry magazine The Verge.

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    Netflix: charging users for sharing accounts? A pointless undertaking

Another strategy to counter the subscription and revenue decline is ad-supported streaming, as Hastings says in the video above. Netflix can't force revenue growth forever by constantly raising subscription prices - most recently last March - the CEO said. That's why he'd even put up with that taboo-breaking:

«Es stimmt, dass die Einführung eines werbefinanzierten Angebots für das Unternehmen eine grosse Umstellung bedeuten würde. [...] Aber für jene, die einen niedrigeren Preis wünschen und werbetolerant sind, könnte das Modell sehr viel Sinn machen.»

In fact, the streaming giant wouldn't be the only one with an ad-supported offering. US competitors such as Hulu, Peacock and HBO Max already offer subscription models in which viewers pay less or nothing at all in exchange for occasional advertising interruptions. Disney also recently announced that it will add an ad-supported subscription option to Disney+ by the end of the year.

A third, new revenue stream could be a live sports offering for the first time in Netflix's history, Netflix co-CEO Ted Sarandos told online industry magazine Deadline. Co-CEO Reed Hastings might even have considered buying the F1 rights after the success of Netflix's Formula 1 series "Drive to Survive." Sarandos, on the other hand, tends to keep a low profile when it comes to live sports:

«Ich sage nicht, dass wir nie Live-Sport machen werden, aber wir müssen neue Einnahme- und Gewinnquellen finden.»
Titelbild: Shutterstock.

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I'm an outdoorsy guy and enjoy sports that push me to the limit – now that’s what I call comfort zone! But I'm also about curling up in an armchair with books about ugly intrigue and sinister kingkillers. Being an avid cinema-goer, I’ve been known to rave about film scores for hours on end. I’ve always wanted to say: «I am Groot.» 

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