Netflix (NFLX 0.58%) is currently operating on a promotional level that means more expensive customers. The company has yet to reveal pricing details or confirm an exact launch date, only saying it will arrive in early 2023. But there are signs that the ad segment of video-on-demand (AVOD) is entering the economic phase. , which may mean. It’s a difficult issue for Netflix’s new advertising campaign.
Ads as a way to reignite subscriber growth
Historically speaking, Netflix founder and CEO Reed Hastings was against the idea of introducing an AVOD level, suggesting such an offer would create unnecessary complications. To see also : What Homeowners Think About the Housing Boom. But in the wake of declining subscriber numbers earlier this year (and a sharp drop in its stock price), Netflix has changed course, suggesting that the ad program can coexist with ad-free advertising levels.
Netflix has since signed an exclusive partnership with Microsoft. The tech giant will handle the technical aspects of accepting ads on the Netflix platform, including inventory management and ad sales.
Market watchers generally agree about Netflix’s face. Mike Proulx of Forrester suggested that there is a large base of customers who would be patient with ad breaks, and Michael Nathanson of MoffetNathanson predicted that the streamer could generate revenues of 1.2 billion dollars from the advertising level. However, recently there have been signs that the advertising industry is not particularly strong.
Netflix’s AVOD tier could land at a tough time
Roku (ROKU 9.42%) recently released its impressive results for Q2 which led to a significant drop in the stock price: Despite adding 1. On the same subject : Commercial real estate in mid-2022: the big slowdown.8 million users in the quarter, the streaming platform posted a dollar loss 112 million, indicating “a significant decrease in TV advertising spending due to the macro-economic situation.”
Roku told shareholders that it saw consumers “moderate spending” in the quarter and that “advertisers scaled back” their advertising efforts. But perhaps most concerning to Roku’s stakeholders (and its rivals) is the streamers’ belief that things won’t improve quickly. “We expect these challenges to continue in the near future due to the economic problems affecting the global market,” the company said.
For Netflix, the news that buyers and sellers are tightening their belts probably couldn’t come at a worse time. The company has put its flag in the ground by announcing its advertising level at the beginning of next year, but if Roku’s prediction is correct, and the “concern with the economy” continues, it is possible that Netflix’s AVOD offering may struggle for generating large amounts of money from subscribers and advertisers a. launched.
Of course, it’s arguable that Netflix’s advertising level may be somewhat immune from the market pressure that Roku has revealed. Netflix is the most popular streaming service in the world, and is home to popular shows and movies like Stranger Things, Squid Game, and Red Notice. However despite the strong list, the streamer lost customers on many fronts.
Still, it makes sense that, by the time Netflix gets ready to roll out its AVOD program, the market conditions outlined by Roku could improve. Or not. The professional services company Deloitte stated that, if the recession comes, it is likely to land in late 2022 or early 2023 – which could put a dent in Netflix’s plans.
Netflix could pause the launch of its ad tier
If things get worse economically, Netflix may decide to delay the launch of its advertising program. In addition, the company is very specific about when it will come to market, so the streamer can choose to bide his time until buyers and sellers are more confident. See the article : These 5 new Netflix releases will have everyone glued to their screens next week. But will the stakeholders do the same? After all, subscriber numbers are important, and Netflix has made AVOD an important part of its strategy to drive growth again.
Market watchers who want to gauge Netflix’s expectations for AVOD will certainly do well to keep an eye on global economic conditions in the coming months. However, they should pay attention to the development of Netflix and Microsoft integration. If there is a hint that the advertising system may not be ready to launch in early 2023, it may be a sign of the need for soft design, rather than any technical concern.
Tom Wilton has a business relationship with Netflix, but has no financial position in any of the listed stocks. The Motley Fool has positions in and recommends Microsoft, Netflix, and Roku. The Motley Fool has a disclosure policy.
Tom Wilton has a business relationship with Netflix, but has no financial position in any of the listed stocks. The Motley Fool has positions in and recommends Microsoft, Netflix, and Roku. The Motley Fool has a disclosure policy.
