As the streaming wars continue to heat up, the various services on offer are inevitably going to start cannibalizing each other’s user base, because there’s very few people that are willing or even able to afford shelling out for all of them. Netflix, Amazon, Disney Plus, HBO Max, Peacock and Hulu all boast a solid lineup of content, but eventually the rise in subscriber numbers is going to taper off as customers decide what combination suits them best.
As the market leader with over 100 million more users than their closest competitors, Netflix can rest easy that their dominance will likely never be challenged. Despite several incremental price hikes over the years, the business model has largely remained the same, although new features are trialed or implemented on a regular basis to try and freshen things up.
One tactic that several other platforms have been using is to offer a lower price point for their subscribers, but offsetting that with advertising revenue by playing commercials and ads, which has always been a staple of the television viewing experience anyway. In the age of binge watching, though, that doesn’t sit too well with those who can’t even wait seven days for a new episode of a popular show, and in a recent interview, co-founder Reed Hastings admitted that he’s not interested in bringing ads to Netflix.
“You know, advertising looks easy until you get in it. Then you realize you have to rip that revenue away from other places because the total ad market isn’t growing, and in fact right now it’s shrinking. It’s hand-to-hand combat to get people to spend less on, you know, ABC and to spend more on Netflix. There’s much more growth in the consumer market than there is in advertising, which is pretty flat. We went public 20 years ago at about a dollar a share, and now we’re more than $500. So I would say our subscription-focused strategy’s worked pretty well. But it’s basically what we think is the best capitalism, as opposed to a philosophical thing.”
Hastings is refreshingly honest in admitting that he’s found a form of capitalism that works best for him and his shareholders, and if Netflix was to start airing ads and commercials, then there would no doubt be a massive backlash from the subscribers that have grown accustomed to the way the content has always been made available.