In an attempt to boost revenues, the company plans to launch an ad-supported subscription tier in November 2022, months ahead of the initial schedule. The new subscription will be more cost-effective but will also introduce unskippable ads at the beginning of each episode/ movie, which could prove an inconvenience for those use to binge-watch their favourite shows.
Much like Netflix, most online streaming platforms, including Disney+, HBO Go, Amazon Prime, and Hulu, earned their subscription base by adopting a no-ad policy, allowing customers to watch as much content as wanted for a flat monthly fee, without any ads. The business model gained momentum over the years and boomed during the pandemic years, when most cinemas and leisure places were closed, forcing people to resort to in-house entertainment, mostly from online streaming services.
However, as the subscription based continued to decline due to various factors, including the content quality, Netflix was forced to explore new ways of making revenue and keeping stakeholders happy. The renewed subscription plan is set to go live on 1 November 2022 in various countries across the globe, including the US, Canada, Germany, and France.
Disney+ is another popular streamer that chose to provide its audience with an ad-based plan for a cheaper subscription fee, starting on December 2022. And, if the trend continues, it is likely to see other online streaming platforms adopt similar changes to keep up with the higher production costs.
Blockbuster was, without a doubt, a titan in the late 1980s early 1990s, with few forecasting its failure only a decade later. Launched in 1997, Netflix has easily become a revolutioniser of the industry, providing people not only with their favourite shows on demand, but with a continuous list of new entries, in-house designed shows, movie studios, and even special deals with celebrities for reality shows.
However, many were reluctant at the beginning, stating that Netflix’s business model will not catch the hype and could not compete with well-established movie renting businesses like Blockbuster. While it bloomed and became a worldwide recognisable brand, Netflix is facing generation-specific challenges.
With global subscribers declining in consecutive quarters, the company was forced to cut costs to keep its margins at around 20%, and this includes launching the new ad-supported subscription plan. In mid-2022, the streaming giant lost almost 1 million paid subscribers, following a 200,000-subscriber loss in the first months of the year.
Even so, Netflix announced it will not support crypto-based ads due to regulatory scrutiny and their high risk. Similar actions were taken in the past by Meta (formerly Facebook) and by Google’s parent company, Alphabet, who banned any crypto-related advertisements on their platform for a year, before reversing the decision. Similar bans will be applied on any political or gambling-related ads, but not pharmaceuticals.
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