Netflix, our collective trash heap of mostly unwatched or unwanted content, would like you to know that despite a tidal wave of speculation that it’s not going to start serving you up ads. The stock market darling is suddenly losing subscribers and executives appear to be a little touchy about it. Halfway through its disastrous earnings report - in which it revealed it’s bleeding U.S. subscribers - the company explicitly addressed any insinuation about ads as, essentially, a crock of shit.
In its latest quarter, Netflix lost around 126,000 subscribers in the U.S., a defeat that the company blamed on its content slate as well as on subscription price hikes. The company also said it’s subscription adds globally topped out at 2.7 million, well below its forecast of 5 million new customers — which is a big yikes. The company’s shares dipped by more than 10 per cent on Wednesday following the report. And, as the company acknowledged, Disney, Apple, WarnerMedia and others haven’t even made their debut yet.
According to Bloomberg’s tally, this was Netflix’s worst earnings report since 2011 when it split it’s streaming and DVD business prompting an exodus of over 800,000 subscribers.
It’s hard to pinpoint a single reason for the sudden loss of subscriptions but the company has faced a steady stream of headlines warning that the addition of advertising to Netflix is inevitable — be it in the traditional service or in a separate tier.
It’s also had to address its competitors consistently reminding the world that it’ll lose the rights to high-profile shows like The Office and Friends in the coming years. Even if those events aren’t happening in the here and now, the press attention could simply be reminding people that they wanted to cancel Netflix anyway. The advertising talk, at least, seemed to rankle execs who addressed it directly in an earnings call with investors.
“We, like HBO, are advertising free,” the company said. “That remains a deep part of our brand proposition; when you read speculation that we are moving into selling advertising, be confident that this is false. 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.”
This, you may be thinking, is a lot of noise about being ad-free from a company that turned one of its few good originals, Stranger Things, into a poster child for excessive brand tie-ins.
But, if one recent study is to be believed, Netflix could potentially lose about a quarter of its subscribers if it switched to an ad-supported model, so the company is probably smart to trumpet its focus on “viewer satisfaction” as much as it can before something like 300 other soon-to-launch streaming services enter the fray.
So, the good news? No ads on Netflix for the foreseeable future. The bad news (for Netflix)? It’s going to need to give some serious consideration to its non-Stranger Things content strategy if it hopes to fix this mess before the new kids arrive on the block.