In credit to YouTube and Hulu, they give you the option to go ad free, or in the case of YouTube pay nothing at all. Have cheap price and ads, or pay a little more and get the ad free experience. I happily enjoy ad-free Netflix, YouTube and Hulu.
> I think this would break their brand and is more short-term thinking, i.e. "how do we increase value in the next quarter", rather than long-term thinking of how to keep growing as a company.
If you have read the article and try to respond to the authors points more directly, he is making a pretty compelling case as to why this is not short term thinking at all - subscriber growth is effectively over for the company now in the near term, there are little new customer households left to sell a subscription to for Netflix, which is of course why we are seeing more frequent subscription price rises too. On the contrary, he is laying out a long term strategy that may still deliver growth, something subscriptions increasingly won't as subscriber growth continues to inevitably fall.
As YouTube and Hulu both prove, one can have ad-supported and ad-free subscription tiers on the same service, and I suspect is likely the path Netflix would follow if they pursue such a plan in future. While as an individual you may not like ads (thats fine!), the slow down of subscriber growth at Netflix is pretty clear and will require a response from the business, which so far has been price rises...
Netflix has barely tapped its global potential (partially more and more users of countries come online world-wide), and many companies have experienced what they call "demand pulled forward", i.e. extra growth in pandemic that then falls as pandemic heads towards a close. This is short term, and he has assumed that the slow in growth is the "inevitable decline" of Netflix Subscriber growth.
Also, to be clear, I think Stratechery is an incredible source and usually agree with him. I don't in this case.
I wasn't trying to respond to his points more directly, I was taking on the perspective of what is good for the companies growth.
Just because you "happily enjoy ad-free Netflix, YouTube and Hulu." Doesn't mean most do (and there are strong statistical reasons that indicate that others enjoy it more as well).
The problem with this argument is it is not thought through. Expanding to newer markets is not about simply enabling credit card payment from those countries.
The performance in India (not good) proved recently it is about localizing the content. Creating or buying new content for these new market costs money, and then managing those (staffing up local orgs, local production center, data center, etc.) also costs.
Netflix is in content business, unlike software it is not about making copies and distributing world wide at zero cost.
You're correct it is a content business, they just spent 17 billion on new content, far more than any other streaming provider (and have the subscribers to support it). Specifically in India, with Indian creators, and it worked. It's in their book "No Rules Rules".
Netflix in India is the best example of an American company attempting to grow in India and failing because they don't have any understanding of the culture. Google, Apple, and even IKEA have figured this out. I'm sure Netflix will, too. But it'll take them a bit of time.
Just jiggle the projection of how many people would cancel, and whalla!! You can justify anything.
can't companies continue to exist on the number of subscribers that they have?
can they not reduce costs -- while continuing to service that # of subscribers -- to generate better returns for their shareholders? would such actions cause shareholder/investor revolt?
why?
> the slow down of subscriber growth at Netflix is pretty clear and will require a response from the business
how far does this go? when google or amazon or netflix or whomever has an active user account for almost all human beings on the planet, what then?
why DOES a business need to respond when their subscriber growth has passed the nadir for given market(s) at given tiers when the ROI for that business at those tiers and market volume is ~20% per quarter?
are those returns not enough? if the company (Netflix) could keep existing revenues at existing customer volumes while also reducing their infrastructure/delivery costs, would that not be enough??
would they NEED more customers?
why?
If you are not constantly growing then you will not have everyone with you, this is because new people reach adulthood. You want them in your service while still retaining the older ones.
In a steady state when all old population have your service and new ones are automatically adopting it, then you are a public utility (Ex. social security).
And when you are a public utility or essential service then you don't have to market yourself, it becomes money printing business and it is dividend company and not a stock growth one.
Unless something has changed and I'm unaware, this is not entirely true for Hulu. I've been paying for that plan for years and they definitely still play ads for select shows.
Edit: I think it has something to do with it being a network show that Hulu hosts the day after it airs on cable, or something, but they're definitely still there.
There's that *most* word.
In the US its $12.99 right now, and has been around a while: https://help.hulu.com/s/article/hulu-no-ads#hulu
They also have a $6.99 sub that does have ads, which may be what you are thinking is the only option? https://help.hulu.com/s/article/how-much-does-hulu-cost
To my knowledge no one can watch Hulu with ads and no sub like YouTube - all plans have a subscription, you just pay more to remove the ads.
> Due to streaming rights, there are a select number of shows from our streaming library that will play with a short ad break before and after each episode for Hulu (No Ads) subscribers
> Shows and movies from HBO, SHOWTIME, Cinemax, and STARZ don’t have ad breaks, but there may be promotional content before certain videos.
Almost every single streaming show from Hulu themselves without exceptions is ad-free on the 12.99 plan, exactly as the plan name says. In addition to understanding the support page, I use the service and the no-ad plan almost every day in my own home, it's definitely a thing and works exactly as its name (no ads!) suggests. Its probably why it's called the "no ads" plan...
Thats almost ad-free not ad-free.
Not entirely, though, for YouTube because paying doesn't remove the "And here's a word from our sponsor" segments that people are now using instead of ad breaks, right?