Changes have been prepared for a long time in order to increase the income of their platform. Netflix it’s here now. In early November, the streaming service officially launched a new, cheaper monthly subscription package, but it also includes ads.

Netflix is ​​not alone at this stage as it is working with Microsoft. The result of this collaboration is a new service that will be available in 12 countries (USA, UK, France, Germany, Italy, Spain, Japan, Korea, Mexico, Brazil, Australia, Canada) with a subscription cost of about $7. , 30%-40% less compared to the basic plan.

“The timing of the announcement was anything but random as its biggest competitor, Disney, announced its plans to bring ads to Disney+ on December 8 in the US,” he told kathimerini.gr. Michalis Handakas is a Technology, Media and Telecommunications Analyst at S&P Global Market Intelligence.

Subscription with ads

The difference from the previous subscription mode is that with this offer, subscribers will watch from five to seven minutes of advertising per hour, which will be shown without fail before and during movies and series.

“Because the ad-supported subscription lacks some of the features that Standard and Premium have, such as 4K, download capability, and simultaneous streaming, it will appeal mainly to new or regular subscribers, as well as those who pay now for the basic program, and they want to save a few euros,” explains Mr. Handakas. In addition, initially subscribers will not have access to all titles, and original films, as announced, may remain ad-free for a limited time after their release.

But how did Netflix come to the final decision on this change in the way they pay for streaming services, which is estimated to benefit about 40% of subscribers over the next three years? “Ad-supported subscriptions are very popular in the US, as we have seen on Hulu, Peacock, Paramount+ and others, where more than two-thirds of their subscribers opted for the ad-supported option,” says Mr. Handakas.

The cheaper ad subscription is a surprise development and represents a change in company policy, as as recently as 2020, Netflix CEO Reed Hastings banned ads on the platform, saying it would be a tricky field.

The reason for this spectacular reversal, of course, came after the announcement of Q1 2022 earnings, when the platform experienced a significant loss of subscribers for the first time in a decade.

This new hybrid subscription/advertising model is part of a broader trend in the streaming industry. “After a decade of rapid growth, video streaming providers are now facing stiff competition from technology companies (Amazon, Apple, Alphabet), studios (Warner Bros. Discovery, Paramount) in a deteriorating macro environment with content production and licensing costs rising, allowing small profits,” says Mr. Khandakas.

The role of advertising

“There was a chaotic situation around ads, many thought ads were annoying because they interrupt the flow of the program, but also from an ideological point of view, since ad-free services provide their subscribers with much more interesting content,” he says. Betty Tzacarestu, Associate Professor, Director of the Advertising and Public Relations Laboratory, Faculty of Communications, Media and Culture, Panteion University.

The events taking place in the advertising industry in response to all other events are very interesting. “Netflix is ​​currently targeting big ad brands. Their product won’t really be a concern as the industry giants are now experimenting with new forms of developing high quality advertising content. I believe that advertising will help new hybrid funding models as it evolves and takes root, offering creative solutions aligned with societal demands and values, largely without betraying what it promised us subscribers from the start. It is enough not to ignore that subscribers want quality products. It will be very interesting if Netflix eventually becomes the Cannes Film Festival for advertising streaming services,” adds Ms Tzacarestu.

The future of streaming

But what does the future of streaming look like with new data taking shape and traditional TV still enjoying a larger share of viewership? “There will be television networks, but broadcasting will change from linear to broadcast. As in cinema, television will not be replaced by streaming as film producers have the opportunity to maximize revenue during this first window period by getting publicity before the film hits the small screen,” says Mr Khandakas.