1706521565 How advertising is redefining paid streaming

How advertising is redefining paid streaming

How advertising is redefining paid streaming

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Last Tuesday, Netflix presented results for the final quarter of 2023. In the final months of the year, the company recorded 13.1 million new subscribers worldwide, the highest quarterly growth in its history, behind only the first quarter of 2020, in total lockdown. It already has 260.2 million subscribers. It also beat earnings forecast for this quarter. Gone is the flood of complaints and bad omens that many users unleashed online when they announced they would have to pay extra to share the account outside the home. It's not just that the apocalypse hasn't arrived on Netflix. Like all other recent decisions, this resulted in the company now having significantly more subscribers and remaining the only international platform with profits.

Four out of ten new users chose the cheapest option that includes advertising in the last quarter of 2023. This subscription already has 23 million unique monthly users, up from 15 in November. In fact, another change communicated last week was that the basic, ad-free subscription will disappear in Canada and the United Kingdom in the spring. Although this option was no longer offered for new subscriptions, those who had taken it out were able to keep it. This option will gradually disappear, requiring users to either pay more to continue without ads or switch to the option with ads.

More information

Netflix was not the first paid platform to offer an ad-supported version. In the US, HBO Max, Paramount+, Peacock and Hulu already had this option. But it was the first major global platform to expand it across the world. This happened at the end of 2022, ahead of Disney+, whose ad-supported version arrived in Spain in November 2023, a year after its streaming rival.

The expansion of advertising on payment platforms is increasing. Warner Bros. Discovery is already taking this route with Max, the service that will arrive in Spain in the spring as an evolution of HBO Max. In February there will be three versions in Latin America: Basic plan with advertising, Standard plan and Platinum plan. Although it has not yet been determined exactly what it will be like in Spain, this division can give an idea of ​​​​where the shots will go.

This Monday, January 29th, Amazon Prime Video activates its version with ads in the US, Canada, the UK and Germany. It will arrive in Spain during 2024 in a second phase of expansion. And in a slightly different way, which could mean an important change in the market. All current Prime Video accounts in these countries will automatically be ad-supported, and users will be offered the option to pay $3 more per month to not see ads.

It's a move that has managers and analysts on alert because it expects the vast majority of subscribers to remain on the version with ads, essentially making Prime Video the largest ad-only paid platform in the television industry. And along the way, Amazon will start making millions of additional dollars from the revenue from this advertising. A detailed report on the matter by The Hollywood Reporter included two business analysts' estimates that the company will generate between $2,000 million and $3,000 million from this advertising in the first year. And both agreed that the vast majority of users would choose to stop paying to have ads removed. All of this could change the rules of the streaming game yet again.

Another platform that goes the route of combining payments and advertising is ViX. TelevisaUnivision's streaming service was born as a free platform with advertising, later launching ViX Premium on a paid basis and without advertising (except for some specific content). They recently announced that they will be launching another option, ViX Premium with Advertising, in the United States, where the premium service can be used at a cheaper price in exchange for a “moderate advertising load.”

Price increase

What will Netflix's next move be? Everything indicates that a new price increase is imminent. “As we invest more and improve Netflix, we will occasionally ask our subscribers to pay slightly more to reflect these improvements, which in turn helps to drive additional investment to further improve and grow our service,” the letter said of the company to investors last Tuesday. From these words it is easy to deduce that a new price increase is imminent, which will once again lead more people to the cheapest option on the platform, namely the one with advertising. And that's exactly what Netflix is ​​most interested in, so that advertising generates more profits.

Another important step is the switch to broadcasting live events. Also on Tuesday, Netflix announced that starting January 2025, it will broadcast exclusively in America and the United Kingdom the weekly preeminent American wrestling program Raw, which has aired on traditional television for 31 years. The agreement allows WWE content to be broadcast in other countries. Before that, the Netflix Slam will take place on March 3rd, a friendly match in Las Vegas between Rafael Nadal and Carlos Alcaraz, which the platform will broadcast live. Television continues to change and Netflix continues to set the pace.

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