Market professionals believe in the cheaper model with advertising, but warn of ‘invasive approaches’ that can disrupt the public
The revelation that Netflix lost more than 200,000 subscribers in the first quarter of 2022 surprised the market. The information, presented by the company when disclosing its balance sheet on Nasdaq, caused the shares to close the day with more than 20% drop.
In the corporate explanation, the company listed four main reasons that would be preventing accelerated growth. Reliance on third parties to get into connected TVs; account sharing, estimated at more than 100 million – today the platform has 222 million subscribers; competition with new streaming players and the audience of linear TV channels; and macroeconomic factors such as inflation and the war in Ukraine.
In addition, the streaming service reported that Covid-19 clouded the data, generating a misinterpretation of what was happening. But what really catches the attention of João Passarinho Netto, partner and VP of creative strategy at Jotacom, is the competition with other players, such as Star+, HBO Max and Apple+.
“[A concorrência] came to pour water on the beer of a service until then hegemonic, almost unique, with players like Disney+, HBO Max and Apple+ standing out for the quality of the works, which many times surpass Netflix – today more focused on variety and quantity”, he says. .
Guilherme Jahara, partner and coCCO at Dark Kitchen Creatives, believes that the company’s departure from Russia, due to the war on Ukraine, is responsible for this drop in Netflix subscriptions, but emphasizes that the multiplicity of platforms is a reality.
“The movement of integrating streaming platforms into a single ‘mega platform’ is one of the indications that this movement of choice and reduction of your bills is a fact. Streams will continue to be the future of entertainment on demand, but they are also the future of TV as a whole”, he points out.
Advertising
To try to recover subscribers, Netflix intends to bet on a cheaper model for the end consumer, which includes advertising. Since 2007, when it was created, the company has always been opposed, at least publicly, to offering the service using this business model, but is expected to adopt it.
“This is a very controversial point because the market has always wanted to advertise on the platform, it will certainly have a positive impact, with very fast adoption depending on the volume of subscribers and opportunities”, says Adeildo Souza, media director at Leo Burnett Tailor Made.
Especially because this is a way that should become more common in the coming years. A survey by Yahoo, for example, showed that Avods platforms will grow 17% over the next four years.
“For this reason, advertising carried out in a non-invasive and non-interruptive way, as it has to be done in streaming, would help to make users who are leaving the platform, especially due to cost, return to the brand”, highlights Daniela. Galego, head of sales at Yahoo Brasil.
Speaking of non-invasive advertising, Bruno Lunardon, partner and CEO of SoWhat, cites as an example TikTok, which emerged without commercialization. “Advertising is a trend to monetize, but Netflix should do so cautiously and target the right commercial opportunities to develop, such as partnered productions.”
On the other hand, the executive points out that, in parallel, there is the issue of brands’ interest in audience volume. “So, losing users can drive brands away or cause a reduction in value. That is, advertising tends to be an outlet for more revenue, but you have to learn from platforms like TikTok, which knew how to do it well and is a dear channel.” of brands for the results it offers, even though it costs more”, he says.
Ana Leão, creative service line leader at Dentsu Brasil, sees that the growth of VOD services accelerates the development of the addressable TV market or the delivery of customized content in a programmatic way. “This changes the capabilities needed for agencies and advertisers to perform in this environment,” she says.
In addition, according to the executive, the market for companies specializing in the development of programmatic ads, embedded in on-demand services, grows considerably in the country, almost in the same proportion as the multiplication of screens.
“It is not enough to understand and deliver customized content to the consumer, because in practice, he does not want to see it, which is the contingent of people who will pay to not see advertising. So, more and more, we will need to use modern creativity to develop messages, whether in advertising format, but also expanding to the participation and insertion of brands within the content of the channels”, he explains.
Despite the enthusiasm with the potential change, Pedro Butcher, professor of the cinema and audiovisual course at ESPM Rio, believes that the platform should take some time to implement the new modality. “Consumers are used to, when paying for a subscription, not having to see ads. This is one of the strengths of streaming channels and advertising has found many other ways to reach the consumer”, he says. In his view, the measure can be considered “somewhat risky and I don’t know if it would be effective”.
Amber Benson, VP and Executive Director of Media and Connections at R/GA, believes in product placement. “My hunch, or maybe hope, is that before Netflix goes all-in on commercial interruptions, they’ll invest in product placement and other more passive advertising programs,” she said.
