Netflix is trying to change the time and pattern with which its customers receive advertisements. It is planning to cut down the amount of ads that the audience receives on its network. Other companies are following the steps of the video giant by cutting ads as well, such as Viacom, reducing its prime-time services ads.
The monetization of any content online, from blogging to video making, is done through the placement of advertisements that are put by third parties with the permission of the publisher. Mostly, the publishers cannot choose the type of advertisements and most of the services online generate money through this platform, such as YouTube, Spotify, and many others.
Netflix Inc., on the other hand, does not need this source of money generation because it earns enough through the monthly subscription fees of its customers. Cable TV and other platforms of video streaming mostly keep both options open – advertisements and subscription charges. 70% of the advertisements are highly disregarded by the customers and they end up skipping them.
If one is paying monthly in order to view the content it wants, this is simply ripping the customer off. One does not wish to see those ads. Online video streaming services are changing their policies because of this fact, since they have other ways to generate profit.
Netflix is planning to change the ad policy, starting from its fourth quarter next year, which will be just 10 or 11 minutes of ads hourly. This is a major reduction. The company delivers 18 to 19 advertisements hourly, currently on its network. Even though its growth is reported to be slower, it still has 70 million subscribers on its network currently. Its revenue in the beginning of this year was $2.9 billion, which is 32% more in comparison to last year’s revenue that was $2.2 billion.
The video streaming giant knows that customers do not wish to be stormed with ads when watching favorite shows unlike cable TVs that keep two platforms of generating revenue – ads and subscription. Netflix wants its customers to be satisfied and thus, it is taking the decision of reducing the ads, as it does not heavily rely on them in order to make profit.
Customers of any service do not like seeing content overflowing with ads if they have already paid for it and the company is well aware of this fact. So, it is taking actions necessary to maintain customer satisfaction.
Netflix stock closed at $109.74 on November 3.