With Netflix announcing its first contraction in subscriber numbers after 10 years of consistent growth, the streaming giant is reportedly considering a crackdown on password sharing and even a pivot to a (partial) advertising model. And it’s not just Netflix – we’re seeing streaming shake-ups all over. So what’s the lay of the land for marketers in the streaming space? We asked three experts from The Drum Network.
Adam Bly, senior digital growth manager, Impression: get ready for the buying rush
Netflix was naive not to expect this drop. Things are back to normal with regards to the pandemic, and likewise with regards to consumer spending habits. The spike in customers they picked up during the pandemic has settled back down, but Netflix’s market is now much more competitive than it was pre-pandemic and macro factors are squeezing hard.
In terms of business models, I wouldn’t be surprised to see Netflix mimic Spotify and YouTube: give consumers the ability to watch for free, ad-supported, or pay to get rid of the ads. This should be a nice option for media buyers, particularly with the wealth of first-party user data that Netflix will have at their disposal for ad targeting.
Don’t expect that model to make up for all the lost revenue. Spotify’s very mature ad business only accounted for around 12% of overall revenue in 2021, but it should be a way to entice users back to Netflix’s platform and ultimately back to a paying subscription.
Marketers are always quick to spot an opportunity and if Netflix moves to offer advertising space on their platform, I’d expect to see this opportunity seized upon by media buyers very quickly indeed.
Jennifer Kohl, executive director, head of US media, VMLY&R: welcome to hybrid
The new working model trend for employees is hybrid and I believe the streaming model will also be hybrid – a blend of subscription and advertising. It is no surprise to me that there is finally a contraction for Netflix after 2020 brought an explosion of streaming options. Many households signed up for any free trial available and it was a sampling bonanza. You could try it all. Given the economic realities such as the cost of living and inflation, many households realize they don’t need so many streaming platforms.
Content will determine which streaming brands excel. That will always be the case. Platforms with breakout shows are the ones that will survive and thrive. HBO was built on Sex and the City and The Sopranos. Netflix ignited because of shows such as Orange is the New Black and House of Cards. According to Kantar, 85% of US households have a streaming subscription and the average household has four subscriptions. I believe this will eventually shrink to three, and they will be the ones with great content.
The truth is, advertising helps to subsidize news and entertainment. Advertising also allows content to be accessible to all. Incorporating advertising as part of the model not only helps generate revenue, but also allows content to be accessible to more people. Marketers should be excited that a platform like Netflix might open its door to paid media budgets. Get ready.
Glenn Minerley, senior vice-president, head of music, entertainment and esports, Momentum Worldwide: how new is this after all?
TV and streaming continues to be an extension of what it always has been: brands creating association with IP that resonates with their core demographic in an attempt to build affinity. The streaming wars has simply created more hit shows. These might not hit as hard as the days of terrestrial, but it creates a more focused opportunity for brands to align. At any given moment, we find five to seven active hits in pop culture with rabid fan bases that are open to seeing their favorite show in a new perspective. Brands deliver that.
This association isn’t all about product integration, either. Yes, the nature of the Stranger Things plot makes it a darling for fast food and soft drink brands, but even period pieces such as Bridgerton offer brands opportunity. Tanquerey scooped up Joe Jonas to join key Bridgerton cast members to embrace existing social media memes around the IP for a witty online campaign. Good old-fashioned licensing is still in play; The Witcher has inspired Old Spice scents and product releases.