[HN Gopher] Why Netflix Should Sell Ads
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Why Netflix Should Sell Ads
Author : jger15
Score : 17 points
Date : 2022-04-04 15:13 UTC (7 hours ago)
(HTM) web link (stratechery.com)
(TXT) w3m dump (stratechery.com)
| horsawlarway wrote:
| I don't normally mind stratechery, but I think this one is a
| _complete_ miss.
| Finnucane wrote:
| I still subscribe to the DVD by mail service. If Netflix had ads
| in streaming content, we'd use that more.
| dddnzzz334 wrote:
| I am just gonna stick to Piracy. I will continue get superior
| service while legit payers will continue to suffer.
| buffington wrote:
| If Netflix introduced ads I'd cancel immediately, even if my paid
| plan didn't show me those ads.
| chrismeller wrote:
| "This post contains product placement"
| axg11 wrote:
| There's a wider dilemma at play for Netflix. As the article
| points out, they've reached a point where their main product
| (paid streaming) has saturated the market. They won and there's
| not much more to be gained there.
|
| Options for their next move essentially boil down to:
|
| (a) expand into "other bets" (e.g. games)
|
| (b) compromise on the quality of their product and brand by
| selling ads to gain incremental revenue
|
| (c) give up on growth and be happy with a large, sustainable
| business
|
| They are openly pursuing (a), which is the ideal outcome. Ideally
| they can even launch gaming or some other form of entertainment
| as a separate subscription, helping to diversify their revenue.
|
| I see (b) as the backup plan. If they're not able to diversify
| into another revenue source, their next best bet is to compromise
| their existing product and extract the final bit of juice using
| advertising. Some number of customers will drop down from paid to
| free, and that number is difficult to model. Netflix could also
| end up shooting themselves in the foot by introducing ads, if
| that convinces the whole industry to do the same. In the long run
| that will reduce margins for all.
|
| Finally, (c) isn't compatible with the type of capitalist society
| we live in. Sometimes a company has peaked and that's OK.
| michaelbuckbee wrote:
| Beyond pursuing, right now, if you log into the Netflix app on
| your iPhone they have a Gamepass/Apple Arcade style set of game
| that you receive alongside your subscription.
| orhmeh09 wrote:
| Indeed, I played a round of a game made by Trivia Crack last
| night. It was my first time and I think it's a new addition?
| Just popped up on my Home Screen yesterday.
| zck wrote:
| I think people are missing the suggestion of this article. It's
| not suggesting that Netflix adds advertising to the existing
| subscriptions; it's suggesting they add a lower-priced
| subscription supported by ads.
|
| >...it would create a new benefit for those willing to pay (i.e.
| no advertising for the highest tiers).
|
| If they kept the existing $10/$15.50/$20 plans the same
| (https://help.netflix.com/en/node/24926), but they add a $5 ad-
| supported subscription, that's not changing anyone's experience,
| unless they choose to switch.
| badrabbit wrote:
| No! At any freaking tier. What stops them from starting to sell
| data from other tiers? It will become part if their business
| model and will eat away everything they do, including content
| creation. Put that cancer back in pandora's box please!
| buffington wrote:
| Everyone's experience changes when a company begins to consider
| ad revenue.
|
| How those changes shake out is hard to predict. It's not a
| stretch to suggest that even little things change for everyone
| though. Adding ad revenue changes how a company thinks about
| nearly everything, whether they're aware of it or not, and
| ultimately the end user suffers.
|
| For example, Netflix would likely start trying to tweak content
| discovery in a way that benefits advertisers. Rather than show
| me content that matches my historical interests, they show me
| content that optimizes ad revenue as well. It's unlikely they'd
| maintain two different "ad-free" and "ad-full" recommendation
| algorithms.
|
| Motivated by pressure from advertisers, Netflix might be less
| inclined to produce or provide content that made advertisers
| uncomfortable or benefitted an advertiser's competitors.
|
| When producing content, they now have two bosses: subscribers,
| and advertisers. Both have entirely different expectations.
| Those expectations push Netflix into making compromises, and
| rarely do those compromises produce outcomes that are better
| than if they only focused on making one side happy.
| zck wrote:
| This is a fair critique!
|
| It's just more nuanced than "I don't want to watch shows with
| ads".
| formerkrogeremp wrote:
| And we'll being going to piracy if we had to watch ads on
| top of paying a monthly fee. This would be ridiculous.
| There's advertising almost everywhere else. Why do we need
| more advertising?
| badrabbit wrote:
| You know how there are so many nice posts that make you go "I
| would want to buy this person coffee/beer if I could.", I feel
| the exact opposite towards this person. People like this are why
| shitty services like Hulu exist and why cable TV charges you $200
| and is 70% (at least) ads!
|
| I will pay netflix more than any cable company because the
| quality of their content.
|
| Exploitative capitalism at its finest. Shortsighted greed with no
| room for imagination. I can spend 15 min and come up with at
| least 5 ways to charge customers more without needing to sell
| them ads. I don't care if it costs $0.99 I will cancel if they
| have even one ad and I will pay up to $2-300 for no ads
| (including for other users because it creates a perverse
| incentive to collect user data and sell anyways). You want
| cheaper with ads? There is a myriad of services that provide that
| (although the cheap part is rare!)
| mrlonglong wrote:
| Do that and I will end my Netflix subscription.
| Ancalagon wrote:
| As other commenters out this seems like horribly short term
| thinking. The reason I subscribe to Netflix and Amazon prime and
| NOT to Hulu or YT is because Hulu has ads (prime has internal ads
| I suppose, but I've always been able to skip those unlike
| YouTube).
|
| I understand content generation is expensive. Maybe Netflix needs
| to expand more on the IPs they currently own? Merchandising and
| such (how about a LEGO/Stranger Things crossover anyone?)
| Differential pricing models for other countries would make sense
| too. I'm sure the board has thought of all of these and none are
| particularly easy, but putting ads where they don't belong would
| ruin their brand.
| michaelbuckbee wrote:
| Both Hulu and YT have premium (mostly) ad-free experiences. I
| say mostly as the line gets a little blurry with cross
| promotion of other shows on the same service.
| Ancalagon wrote:
| Yeah and I think this blurred line of ads vs no ads damaged
| their brands at the onset as now I associate them with old
| school cable tv, which is what I was trying to escape.
| akagusu wrote:
| Will it be free if it sells ads or will people pay for the
| privilege of watch ads?
| KerryJones wrote:
| This changes the brand of Netflix considerably. While many
| competitors do this (Hulu, YouTube), it's a terrible experience
| and I've seen both myself and others simply turn to Netflix to
| avoid the ads. I think this would break their brand and is more
| short-term thinking, i.e. "how do we increase value in the next
| quarter", rather than long-term thinking of how to keep growing
| as a company.
| giobox wrote:
| > While many competitors do this (Hulu, YouTube), it's a
| terrible experience and I've seen both myself and others simply
| turn to Netflix to avoid the ads
|
| In credit to YouTube and Hulu, they give you the option to go
| ad free, or in the case of YouTube pay nothing at all. Have
| cheap price and ads, or pay a little more and get the ad free
| experience. I happily enjoy ad-free Netflix, YouTube and Hulu.
|
| > I think this would break their brand and is more short-term
| thinking, i.e. "how do we increase value in the next quarter",
| rather than long-term thinking of how to keep growing as a
| company.
|
| If you have read the article and try to respond to the authors
| points more directly, he is making a pretty compelling case as
| to why this is not short term thinking at all - subscriber
| growth is effectively over for the company now in the near
| term, there are little new customer households left to sell a
| subscription to for Netflix, which is of course why we are
| seeing more frequent subscription price rises too. On the
| contrary, he is laying out a long term strategy that _may_
| still deliver growth, something subscriptions increasingly won
| 't as subscriber growth continues to inevitably fall.
|
| As YouTube and Hulu both prove, one can have ad-supported and
| ad-free subscription tiers on the same service, and I suspect
| is likely the path Netflix would follow if they pursue such a
| plan in future. While as an individual you may not like ads
| (thats fine!), the slow down of subscriber growth at Netflix is
| pretty clear and will require a response from the business,
| which so far has been price rises...
| aidenn0 wrote:
| It is also non-trivial to implement in a way that supports
| older devices; I can't watch ad-supported prime video channels
| on my BluRay player, which is rather annoying.
| scotuswroteus wrote:
| Why Stratechery aspires to be an industry rag but the guy can't
| write well (2239 of 2239)
| version_five wrote:
| They may be able to make more money this way. To me this is akin
| to explain why we should be strip mining or clear cutting more.
| It works from a scorched earth capitalism perspective, but
| doesn't leave is in a good place
| axg11 wrote:
| Agreed. Netflix need to decide whether they want to be more
| like Google/Amazon (multiple diversified bets) or Spotify (one
| undiversified but very strong ecosystem).
| PaulHoule wrote:
| Subscribers are more valuable people to market to than non-
| subscribers because they've already qualified themselves by
| proving they'll spend money for something.
| AnIdiotOnTheNet wrote:
| A big part of that something is not wanting any goddamned ads
| though.
| robbedpeter wrote:
| Ads are by their very nature derogatory to anywhere they
| are placed. Ads never add value to any experience. They
| always take time and attention from the viewer's intended
| activity.
|
| Not all product information is advertisement.
| PaulHoule wrote:
| I think many people think the ads on the Superbowl are an
| attraction.
| robbedpeter wrote:
| The advertisement part of the superbowl content takes
| away from being entertained. The negative impact to the
| consumer is being manipulated, for example, to prefer
| budweiser over coors because the giant horses and
| dalmatian puppy made you tear up. That's got nothing to
| do with beer.
|
| Remove the advertisement / manipulation from the content
| and it's more valuable to the consumer.
| panda88888 wrote:
| I feel super bowl commercial are different though. They
| aren't the average ads--they are the high budget, high
| creativity jewel crown of ads.
| cupofpython wrote:
| Netflix could have gotten away with ads a few years ago
| maybe. Not now with all the competition available. their
| content is relatively weak tbh now that a lot of the
| classics have moved to other platforms. I'd be gone
| immediately
| horsawlarway wrote:
| I don't think they could have, even then.
|
| Competition was incredibly fierce, it just came from
| cable TV.
|
| The main subscriber base for Netflix was essentially
| folks who didn't want to see ads, and were willing to
| ditch cable tv for that experience.
| nopenopenopeno wrote:
| This is just regular capitalism.
|
| Adam Smith, John Stuart Mill, and Karl Marx all agreed on the
| tendency of the rate of profit to fall.
|
| https://wikipedia.org/wiki/Tendency_of_the_rate_of_profit_to...
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