What publishers can learn from Netflix’s successful ad-free subscription model
There’s perhaps no company as vehemently opposed to the idea of selling ads as Netflix.
Ever since launching its streaming platform in 2007, Netflix has remained ad-free. Other than on-demand video content, the lack of commercials is what drove users away from cable television and into the arms of the streaming giant.
But with the impending launch of rival streaming services like Disney+, speculations that Netflix could be tempted or rather would be forced to sell ads in order to stay afloat, are growing.
But Netflix doesn’t have any plans to start running commercials on its streaming service, now or ever.
What makes Netflix place unwavering faith in its ad free, subscription-based revenue model?
The answer lies in its product philosophy: focus on making paying customers happy.
User experience is of key importance. It not only helps companies build a solid relationship with their customer, but it also helps them constantly improve their product/service.
We believe we will have a more valuable business in the long term by staying out of competing for ad revenue and instead entirely focusing on competing for viewer satisfaction.
Netflix has gained deep knowledge of its global subscribers’ identities, devices, locations, viewing habits and behaviors. This insight helps them improve on their content offerings and marketing strategies.
Netflix recently launched a lower-priced, mobile-only plan for its India market as they discovered that their Indian subscribers watch more on their mobiles than anywhere else in the world.
It invests millions of dollars in algorithms that make personalized recommendations of movies and television shows based on their viewing behavior. Customer loyalty and increased revenue are the direct byproducts of precise personalization.
Knowing their customer base well helped Netflix successfully launch their own original content. They realized that once a customer has watched everything on their wish list, they might discontinue their subscription.
Ted Sarandos, chief content officer at Netflix, said the top 10 most-watched shows on Netflix are all original programs, and only four non-Netflix are in the top 25.
People who subscribe to one media channel often see the value in and get comfortable start a subscription habit in others.
More than a third (34%) of Americans say they believe they’ll increase the number of subscription services they use over the next two years, according to a new report from eMarketer.
As a result, we are witnessing a mass exodus of the content world from advertisement-dependent revenue streams. From news (The Ken), streaming music (Spotify), to video (YouTube), everyone is racing to launch their own subscription models.
In a survey of 200 publishing executives from 29 countries conducted by Reuters Institute for the Study of Journalism, 52% said subscriptions and membership would be their “main” revenue focus in 2019.
To this effect, digital media has pivoted to programmatic advertising, pivoted to platforms, pivoted to aggregators, pivoted to podcasts, and pivoted to video. But as we have seen with Netflix, the key to successful subscription models is simpler than all that: Pivot to consumers.