A New Ad-Based Tier Won’t Fix What Ails Netflix
from the must...drive...quarterly-growth dept
As a publicly traded company, it’s simply not good enough to provide an affordable service that people genuinely like. The pressure to deliver quarter over quarter growth often takes on a tendency toward auto-cannibalism; price hikes, customer support cuts, dumb ideas justified through greed, all designed to goose growth, but often at the cost of brand reputation and service quality.
That’s the metamorphosis currently underway at Netflix. After years of explosive growth, the company lost nearly a million subscribers between April and July. In part due to new competition in streaming, but also because Netflix executives are stuck in this auto-cannibalism loop; sacrificing what’s popular about the service (affordability, no ads, few weird restrictions, decent content) to feed Wall Street’s insatiable maw.
After years of affordable rates and no ads, Netflix has been raising prices. On the flip side, they will soon provide users with an ad-based tier. It’s estimated to be around $7 to $9, and will feature around four minutes of advertising each hour, a metric that will inevitably sneak skyward as Wall Street demands it:
Sources told Bloomberg that this ad-supported tier will feature four minutes of commercials per hour (I can’t wait for eight minutes of commercials during the next Stranger Things finale). Also, the company is expected to run ads before and during programs, but not after. A timeline for the rollout is unclear, but Bloomberg says that the tier will first be released in “at least a half dozen” markets in the last three months of 2022 with a larger release in 2023.
An ad based tier might goose subscription numbers on the short term, but it’s not going to cure what’s causing broader defections. Customers are leaving for competitors because Netflix’s catalog quality has deteriorated, the price for the service has gone up, and the company’s increasingly looking to nickel-and-dime its subscribers in a way that’s reminiscent of traditional cable.
It’s most apparent with the company’s dumb crackdown on password sharing. For years, Netflix made it very clear that password sharing wasn’t just good, free advertising, but something it encouraged:
But now that it’s struggling to meet Wall Street’s insatiable appetite, the company has started framing password sharing as some kind of massive drain on the company, and will soon nickel-and-dime users with extra fees if they share the password outside of the house.
But Netflix already limits the number of concurrent streams per account, making you pay more money for a higher tier if you want to have multiple people streaming simultaneously. Between this and generic, repeated price hikes, Netflix had already more than compensated for the cost of password sharing. Which is to say the password sharing crackdown is really just a transparent effort to nickel-and-dime users.
Many still think Netflix is a value (the standard tier is $10, the Basic plan is $15.50, and a Premium subscription is $20 a month). But with growth stalled and most innovation in the rear view mirror, Netflix is now on a familiar path toward both nickel-and-dimey turf protection, and forgetting the traits that made the service so popular in the first place.