The company representatives emphasized that Netflix will not be able to compete with Google, Facebook, and Amazon in the advertising business.
According to Hastings, Netflix will not be able to compete in the advertising market with larger technology companies like Google, Facebook, and Amazon that collect data from a large number of sources.
“For Netflix, to grow to $ 5-10 billion in the advertising business, it’s a lot of work. There is no easy money here in a long-distance run,” Hastings added.
This announcement was made by Netflix CEO after one of the company’s potential competitors, the Peacock streaming service (owned by NBCUniversal), described its monetization scheme. The video service, which is due to launch in the US market in spring 2020, will offer users a free subscription for viewing ads.
Experts have repeatedly suggested that Netflix can add advertising to its service to offset the rising costs of producing content. Analysts estimate that advertising can bring Netflix about $1 billion a year.
At the same time, the company reported an increase in the number of subscribers amid the launch of competing services Disney + and Apple TV +. Netflix streaming service received 8.8 million new subscribers in the fourth quarter of 2019, well ahead of the forecast. The company hoped to attract 7.6 million unique users in the quarter.
The company reported 167 million subscribers worldwide, of which 100 million were outside the United States. The report also stressed Netflix’s higher-than-expected financial results: revenue was $5.47 billion, instead of the projected $5.45 billion. The growth was 31% compared to last year while operating income rose to $2.6 billion. Earnings per share were $1.30.
The growth in the number of subscribers and financial indicators occurred against the backdrop of the launch of competing services – Disney + and Apple TV +. It is noted that after the start in 2020 of the launch of two more major streaming services – HBOMax from WarnerMedia and Peacock from NBCUniversal, competition in the US market will increase.
In the first quarter of 2020, Netflix predicts a more modest increase in the number of subscribers – 7 million, compared with 9.6 million for the same period in 2019. The company associates this with the ongoing “outflow” of users in the United States.
The launch of the HBOMax streaming service is scheduled for May 2020. Subscribers will be able to access the content of WarnerMedia and third-party copyright holders. In particular – such movies as Game of Thrones and Thorium Big Bang.
The launch of Peacock is scheduled for April 2020 in the United States. That will be available to users with free subscriptions due to the availability of advertising in the service.
To cope with competition, by 2028, Netflix’s cost of producing original content should rise to $26 billion. The streaming service Netflix plans to spend $17.3 billion on content production in 2020, with the company’s long-term debt of $14.6 billion. Last year, the company spent $15.3 billion for the same purpose.
Most of Netflix’s budget in the coming years will be focused on producing original content. We are talking about a deal with Nickelodeon and the contract with the screenwriters of the Game of Thrones. Netflix also signed an agreement with South Korean CJ E&M Corporation to offer original and licensed shows and content produced by the JTBC Content Hub.
Netflix competitors plan to spend much less on original content. In 2020, Disney plans to allocate $1 billion, and WarnerMedia is going to invest up to $2 billion.
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3 Reasons Netflix Isn’t Interested in Advertising
It is a fact that changes in the consumption habits of audiovisual content have produced an unstoppable growth of Video on Demand (VoD) and Video Streaming on Demand (SVoD) platforms. We know that Netflix is the service that leads the segment and, despite this, does not plan to give ground to the competition.
And, although the company of Los Gatos, California reports with revenues of 11 thousand 692 million dollars (2017) and more than 125 million subscribers worldwide, platforms such as Hulu and Amazon Prime Video do their best to get close.
Despite the growth of the competition, Netflix maintains a sustained growth and, according to the company’s data, this is mainly due to its strategy of continuing to add content to the streaming platform and, where its particular way of doing marketing plays an important role.
We know that the company is characterized by managing with a great touch of humor, creativity, and, in some cases, some irreverence of its advertising and marketing actions. One format in which it has found an excellent platform to implement this type of advertising is on the billboards.
- Be present even outside the screen. According to Alison Davis, CEO of Davis & Company, Netflix perfectly understands the importance of bequeathing customers when they are not looking at their screens.
- Connect with users. According to the specialist in an article in Inc., billboards have become an essential source of social media content. It is indeed common to see someone on Twitter or Facebook share the announcement of a series or movie because it impacted, surprised, or served to generate a funny comment, even to raise a complaint about how controversial the statement is.
- Does Netflix have the key to connect with the public? Not all Billboard serves or connects with audiences, often waking up in disgust or apathy. The streaming platform has been characterized by even making a strong polemic, irreverence, and grotesque strength to design creative ads. Although they aroused controversy, met the goal of making the media and people discuss it on social networks and have some expectations for a series or movie.
The key is in the combination of the right timing, an excellent location, regardless of the country, making the complicated simple, and inviting people (and media) to debate your ad.