Are you still watching? Ad revenue: the beginning of the end, or a fresh start for Netflix?

We’ve all heard the dramatic soundbites from Netflix in the last few weeks: talk of falling subscriber numbers for the first time in a decade, followed by US job losses last week putting the company share price into something of a tailspin. Drama aside, the reality is there is something in it: the value of the business has virtually halved in a little over a month. It’s a significant issue, and to stand any real chance of correcting this trend Netflix will need to find ways to broaden a limited revenue model. Once touted as the great market disrupter, Netflix’s troubles are amplified as some of its forward options strongly resemble the market it once sought to disrupt.

Riding the wave of demand for on-demand and the increasing appetite for bingeable content as the pandemic took hold, Netflix felt like a long-term winner. But in the UK the growth, and continued strength of Apple TV, Disney+, coupled to the digital comebacks of ITV and Channel 4, have checked progress significantly, to the point Netflix is now looking at ad-supported options, potentially sacrificing one of its key USPs in the market. Among other opportunities reputed to be under consideration are livestreamed broadcasts, including shiny-floor talent show formats: is it all starting to sound just a little too much like old-school telly yet?

However, it’s not all bad news. One man’s problem is another man’s solution, and the potential for Netflix to drive value by leveraging its substantial bank of first–party consumer data could offer a lifeboat through their stormy sea, with a pantheon of opportunities available based on harnessing user behaviour, and with the potential to cross-target to mobile devices an obvious next step. The key Netflix audience remains device-driven and content-hungry, so the ad proposition may not yet fall as flat as some sceptics suggest. However, if Netflix is able to harness microtargeting capabilities akin to those available via Sky Adsmart, they may be on to a winner amongst an audience increasingly likely to support brands tailored to their individual needs. Given the common practice of watching 20 episodes of a show over a single week period, there may also be ad opportunities for the brave in terms of frequency messaging, with a developing brand narrative articulated sequentially throughout a watcher’s binge sessions.

At Space & Time we’ll be following this one closely, with the on-demand TV market continuing to represent a real opportunity for a diverse mix of brands to grow share of voice among carefully targeted audience groups, increase market share and enhance their digital positioning.