New York (CNN Business)Netflix lost about a million customers last quarter — the most in the company’s 25-year history. But it has stopped the bleeding in a nightmare year, and the company believes its new long-term initiatives will boost sales and subscribers.
Those efforts — which include curbing password sharing and introducing a lower-cost tier with ads — have been cheered by Wall Street. However, they are diametrically opposed to what helped make Netflix the king of streaming in the first place: its beloved consumer experience.
The streamer has never been able to compete with rivals like Disney ( DIS ) in terms of sheer content, but has built its company around giving customers the best overall experience possible.
Now, Netflix ( NFLX ) is trading some of that experience so it can grow in the media business.
“They’re going to make it harder for people to share with their family, make it harder for people to watch in multiple places… If you choose, make advertising interrupt your content,” Michael Nathanson, an analyst at media at MoffettNathanson, told CNN Business. “So the original consumer proposition, which was incredibly valuable, is now being flipped on its head.”
These initiatives are undoubtedly good for Netflix’s bottom line, but they are not necessarily what customers are asking for. This can become an issue as the company tries to simultaneously attract new users, reduce disruption, and make money.
Ultimately, in order for Netflix to succeed in the streaming world, it may have to become less like Netflix.
“We … are advertising free”
“We… are advertising for free. See the article : Netflix Top Movies and Series: What’s trending on July 8, 2022. This remains a deep part of our brand proposition.”
The company added that it believed it had “a more valuable business in the long run by staying out of competing for ad revenue” and would focus on “competing for viewer satisfaction.”
Netflix announced last week that it will partner with Microsoft in building its new ad tier and said Tuesday that it expects to launch the offering “around the early part of 2023.”
In three years, advertising on Netflix has gone from “never, never” to one of the cornerstones of the company’s future growth. That’s sure to be confusing for subscribers, who don’t need to see ads since its existing plans will remain ad-free, but will now have to choose between a cheaper ad-supported plan and a premium one.
“The concern I have with an ad-funded model is whether ad revenue can cover the loss in revenue from premium subscribers, as a portion of current subs will likely downgrade to the subscription option. cheap ads,” Zak Shaikh, vice president of programming at research-based media firm Magid, told CNN Business.
And what an effect ads could have on one of Neflix’s most vital pillars: content.
“Will ads impact Netflix’s supposedly ‘artist-friendly’ content standards and environment?” Shaikh said. “Are advertisers going to expect Netflix to censor certain content that currently Netflix didn’t have to worry about?”
What’s the password?
Password sharing is another area that Netflix is trying to tighten up, but it can be a difficult gambit. Read also : Compass Comes back to Earth.
The company said on Tuesday that it is in the “early stages of working to monetize the [more than] 100 million households currently enjoying, but not directly paying for, Netflix.” Translation: you may have to pay more to split your account.
Netflix has been experimenting with possible solutions by airing two test features in Chile, Costa Rica and Peru called “Extra Member” and “Profile Transfer.”
It will not be easy for users to put to keep their children, friends or colleagues on their accounts. “We know this will be a change for our members,” the company admitted.
Until recently, Netflix had no problem with subscribers sharing their passwords. In fact, the service said in its April letter to investors that the policy likely helped its growth by “getting more people to use and enjoy Netflix.” But now the company needs those people to pay.
Will this alienate millions of consumers?
“What I worry about is that the goodwill they’ve built up over the years … dissipates over time when they do things that should be more unfriendly to the consumer,” said Nathanson, the media analyst. “All the incredible value and goodwill they’ve built is at risk of being jeopardized.”
