How the great Netflix resignation ushers in new growth for CTV
Patrick Johnson, global chief executive officer, Hybrid Theory, has a theory about how the difficult times ahead for Netflix will boost the wider performance of the connected TV (CTV) space.
Can Netflix tempt lapsed viewers back with a cheaper option? / Adobe
After Netflix posted its first subscriber loss in a decade, the ‘great resignation’ saw the subscriber gains of the pandemic go into freefall. In addition to Warner Bros Discovery’s decision to shut down CNN+ weeks after its launch, the wake-up calls for the streaming industry are becoming more acute.
In all of this, there may be an upside here for digital advertising. In a world where trust in advertising has never been lower, and its very value is being questioned, the news that Netflix is finally embracing advertising is an opportunity for marketers to add further impetus to an already booming CTV market.
Two is better than one
With Netflix announcing its plans to introduce a lower-cost, ad-supported service, we’re reminded that content subscriptions do not necessarily omit the exposure to ads. They are two different income streams for providers, but both have just one objective – driving revenue – and future income growth lies in embracing both. Ultimately, continuous subscriber growth is impossible, and every TV subscription service has its own ceiling. When this is reached, advertising moves center-stage, becoming a critical part of any broadcaster’s long-term strategy.
Netflix’s ceiling moment is welcome news for the ad industry. This is the opportunity for adtech to activate its data and play a key role in monetizing inventory from one of the world’s biggest media companies. In doing so, adtech is able to support the shift of advertising budgets not currently spent on digital.
Netflix is taking a leaf out of the book of Amazon, which has a stake in both sides of the streaming market. Its Prime Video offering comes bundled with an Amazon Prime subscription, and it has recently rebranded its free, ad-supported streaming IMDb TV service as Amazon Freevee with ambitious plans for 70% growth this year. Now that Netflix has also embraced the advertising model, don’t be surprised if others follow suit. After all, money talks.
Supporting CTV’s growth trajectory
This all represents a new phase for the rapidly-growing CTV market and a boon for marketers. By offering them access to the kind of scaled, engaged audience they crave, Netflix can give advertisers the opportunity to get in front of new consumer segments – audiences they may have struggled to reach before – in the comfort of their homes. In combining the best aspects of traditional high-impact linear TV with the data-driven targeting and measurement programmatic delivers, marketers have much to gain.
Rather than being weakened by providing both a subscription and ad-supported service, Netflix should be able to tap into greater demand and attract new audiences. It could also win back lapsed subscribers. LoopMe research found that nearly half (47%) of UK consumers cited affordability as the key reason for canceling their Netflix subscription, so a low-cost option may well tempt them back. The result? Netflix can grow its subscriber base while helping drive CTV’s continuing growth.
These changes allow Netflix to absorb the changes as they start to tighten the share rules with their subscriptions. Those unwilling to pay for subscriptions for either personal or financial reasons can still access Netflix’s content via ad-supported models.
With time spent watching ad-supported video rising to a 38% share, we’re already seeing the growing importance of this model. So what’s been touted as a retrograde step for Netflix actually makes smart business sense. Offering consumers a choice of packages at different price points can never be a bad strategy. By helping deliver personalized communications to those opting for its ad-supported service, it can provide more engaging advertising and an improved customer experience, while avoiding the double whammy that just repeating ads brings – annoyed viewers and wasted marketing budgets.
By extending their offerings, broadcasters are continuing the growth of the CTV category to even wider audiences. Far from being a negative, the great Netflix resignation may well be heralding the great CTV recruitment, ushering in a new phase of growth.