Netflix’s third act

The Future. If mailed DVDs defined the first act of Netflix’s story, and uninterrupted streaming marked the second, then an ad-supported option may round out its narrative. While the streamer previously dismissed the idea of bringing ads to its platform, it recently had a change of heart that’s led to “incremental membership growth.” As new subscribers choose to watch ads rather than pay a little more for an ad-free plan, they show that content and advertising may actually go hand in hand — even if it means paying less or nothing at all.

Too many players in the game
According to Wired, increased competition from other streamers — on top of the content that prioritized quantity over quality — slowed Netflix’s growth in 2022.

• In a historic shift, Prime Video became the SVOD market leader in the US last year. According to data from JustWatch, it now holds a 1% lead over Netflix.
• Disney+, which rolled out an ad-supported option in December, edged out HBO Max for third place, maintaining a 5% margin over Netflix.
• Still, Netflix finished 2022 with better-than-expected growth due to its new offering. Beginning in November, customers could pay $6.99 a month to stream content with ads (instead of $9.99 for a basic plan).
• Although few customers have switched from ad-free to ad-supported subscriptions, the new model indicates a big transformation for Netflix.

“Once you start having advertisements, you cannot have that as a side business,” Tony Gunnarsson, an analyst at research company Omdia, tells Wired. “It very quickly becomes the dominant way of doing things.”

Next season at Netflix
Netflix also faces a regime change in 2023. Reed Hastings will step down from his role as co-CEO — which he shares with Ted Sarandos — and pass the baton to Netflix’s chief product and operating officer, Greg Peters.

Together, Sarandos and Peters will oversee the company’s move into a new era, where success is Netflix’s for the taking… but the streamer may have to fight for it.