For almost a decade, Netflix was on a roll! The company was synonymous with the ideals of streaming. Many viewers spent cozy nights enjoying binge-worthy series. The streamer’s original content and subscribers flowed like water, bringing its market cap to more than $300 billion in 2021. In 2022, however, Netflix began to fall out of favour. To keep investors happy, the company made a flurry of quick changes.
Advertising on Netflix
Despite co-founder Reed Hastings’ continuous rejection of ad-supported tiers, Netflix created this cheaper tier to attract more subscribers and earn money from advertisers. This ad-focused tier gained 5 million subscribers in six months and is now one of the most popular subscription tiers – with almost 40% of new subscribers choosing this cheaper option. The company has continued building out the plan, adding 1080p video and the ability to watch 2 streams at the same time. This was only the beginning of their grand plan to reverse their dwindling subscriber base.
Password Sharing and Price Hikes
Netflix took a harsh stance on password-sharing, which frustrated some subscribers. Surprisingly, though, the company declared that paid sharing resulted in more signups than cancellations and led to higher revenue.
In three years, Netflix has deployed three price hikes. The company is stopping its $11.99 per month ad-free plan and pushing these subscribers toward its $6.99 per month ad-supported plan or the $15.49 monthly standard tier. On the surface, encouraging customers to pay less money may seem crazy. It is clear that Netflix has a new, more effective way to earn money: advertising.
Live Shows: W.W.E. Raw
In 2023, the streamer claimed to have seen a higher revenue per customer on its cheaper ad-supported plan. Co-CEO Greg Peters said that the company’s top priority in its advertising business is “scale,” which means “making the ads plan more attractive” and “shifting out plans and pricing structure and other places where we think it’s appropriate.”
Additionally, Netflix recently made a $5 billion deal for WWE Monday Night Raw (to begin in 2025 for 10 years). As commercials are already included within the three-hour-long live show, Netflix won’t show ads for the cheaper tier.
“WWE content is used to a younger demographic that allows Netflix to reach perhaps portions of the greater audience that it will not be able to reach through lower price alone,” says analyst Paul Erickson. “When viewed against their other recent move to eliminate the lowest priced ads-free tier, I would say that they are looking to, much like the rest of the industry… improve their bottom lines.”
Other lead streamers, such as Max and Disney Plus, are fighting to prove that they are profitable. According to Erickson, “Netflix is very aware of the fact that they’re one of the very few must-have streaming brands for a lot of households… They need to keep that title as a must-subscribe service even in the face of aggressive competition.”
Will Netflix be able to survive the brutal streaming warzone or will its relevance be overshadowed by its rivals? Join us for more streaming news.
