Netflix may start Advertising
Netflix users are angry again, and it's not anything similar to the crisis of separating the DVD and streaming services. Rather, the company is currently testing a feature in which it will place video promos for its original content in between TV episodes. In other words, after you conclude an episode, you will watch a short video about other Netflix TV shows or movies before continuing on to the next episode. Sounds a lot like the commercial break or advertisements you see on your cable TV. On the plus side though, Netflix will allow you to skip the video promos if they don't appeal to you.
What is Netflix's reason behind this? How will this raise money for the company? Obviously, Netflix won't earn any money from this, and this feature will annoy its subscribers, which could cost it some revenue. Additionally, Netflix doesn't plan to introduce a more expensive plan in which users can automatically skip the ads (similar to YouTube Red) since the ads are skippable. So what is the advantage of this?
Netflix wants to create a service that allures users into its atmosphere or environment, such that users will spend more time watching its content. It has also hinted its ambitions of the cinema industry by creating its own original content, which take the bulk of Netflix's expenses. It is predicted that the company will spend $13 billion in programming content this year, compared to its plan of spending $8 billion as of October 2017. Goldman Sachs believes this quantity will only continue to grow as it could reach $22.5 billion on content per year by 2022. This massive number spent on original content programming has negated all the company's profit as its free cash flow is about -$1.8 billion. However, with some critically-acclaimed original shows such as Stranger Things, Netflix has attracted more subscribers, estimating around 130 million in Q2 2018, compared to 55.5 million in Q2 2015. As a result, Netflix's revenue has seen a 3-year growth of 28.55%, making the company's risky bet on original content a success. However, Netflix can't continue the steady increase in subscribers, as there are only so many people to go around. So the new goal would be to keep current users active and addicted to Netflix's massive library of original content.
No, this scheme isn't to annoy the subscribers. Rather, it is to keep you attached to Netflix's world. Based by your viewing pattern and preferences, Netflix could make personal recommendations as to which original shows or movies you should watch. It will keep the user more engaged as he or she might find something that he or she likes. Clearly, the company's ambitions for original content are tremendously larger, and it is quite possible that Netflix could come to a theater near you in a few years. This will only support Netflix's brand and transform it from a simple streaming service to a large production empire. In fact, for a brief moment on May 24, Netflix surpassed Disney to become the largest media corporation.
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