Advertisements are coming on Netflix
Do you wish there was a cheaper, YouTube -like version of Netflix.
Netflix is one of the biggest OTT platforms with a revenue of $ 30 billion (source).
But Netflix has been losing subscribers.
According to this Techcrunch update Netflix lost 970000 subscribers in a period of just three months.
5% of the subscribers are long-term, which means, they had been using the service for more than three years.
A big reason might be that much cheaper services are available from other platforms.
In India, Prime Video from Amazon costs just around $12 per year.
Additionally, it comes with Amazon’s prime subscription for free.
In comparison, my Netflix subscription costs me almost $ 105 per year.
Another reason is that good shows are going away from Netflix.
Many production houses like HBO and Disney have launched their own OTT platforms and are no longer licensing their content to Netflix.
The ad supported version of Netflix will be called AVOD Netflix.
AVOD stands for ad-based video-on-demand.
Netflix explores the advertising option
To rev up its sagging revenues, Netflix is going to introduce advertisements between its programs, maybe by the end of 2022. Or early 2023.
The platform has chosen Microsoft to be its advertising partner.
Platforms like Hulu, Disney and HBO are already showing advertisements in some countries.
Netflix plans to introduce an ad-supported subscription tier that will be priced low.
This goes counter to the years of claim that commercials would never be seen on Netflix.
The recent drop in companies share prices has wiped off $70 billion of its market capitalization.
On what shows will Netflix show advertisements?
In a recent announcement Netflix has declared that it will not be showing advertisements on kids content as well as new and original movies.
Otherwise, it will be showing advertisements on all other programs.
Netflix can’t just start showing advertisements at a whim.
It will need to renegotiate with third-party content creators like Sony and other production houses because they may have agreed for their shows to be broadcast without advertisements.
Advertisements may bring additional revenue to Netflix but other studios that provide content to Netflix may ask for their share of 15% or 30%, according to a Wall Street Journal report.
In India Netflix has 5.4 million subscribers.
The total market in India is around 350 million subscribers.
According to Business Today there are around 40 million paid OTT subscribers.
63% OTT viewers in India watch content supported by advertisements, such as YouTube.
Even if Netflix sees India as its primary markets for AVOD broadcasting, it lacks the sort of regional or Hindi content that other OTT platforms like Disney-Hotstar and Prime Video have in abundance.
There is a niche market for English content – at my home our primary consumption is Netflix
Although we have subscriptions of Prime Video and Hotstar.
The Netflix market is quite small and may even be shrinking as new players enter the market.
For example, my wife and I are eagerly waiting for some good Hallmark content to become available in India.
Right now Hallmark movies are available through an app called OTTPlay, but I was not impressed with the choice.