Is this the right move for Netflix?

Is this the right move for Netflix? 800 449 Scriberbase

Netflix stock price is up over 5% on the news that the company will introduce an ad-supported, lower-priced tier ($6.99/month).

Importantly, Netflix has always had certain levers at its disposal to appease investors short-term, including raising prices (which it has done this year), and/or opening the network to targeted advertisers; happening now.

Is this the right move to support the brand’s 20+-year-old history selling the most valuable entertainment bundle in history?

If we take a bird’s eye view for a moment, it’s clear that Netflix is experiencing an industry shift and a change in market fundamentals with competitors now punching from all sides.

To counter this, Netflix has resorted to massive cash outlays on content, a strategy that makes investors increasingly nervous.
In other words, until now, the strategy really has been “more shows, more watching; more watching, more subs; more subs, more revenue; more revenue, more content.” (Ted Sarandos, CEO)

Unfortunately, things break down when the competition heats up (The Walt Disney Company, Amazon, Hulu, etc), and ‘quantity’ misses the ‘quality’ mark.

And, in turn, subscribers start churning at a faster clip.

Moreover, if Netflix’s goal is more of our leisure time, it’s now battling not only what’s available on other networks and streaming platforms, but the world of social media. So, it’s conceivable that to get back to where Netflix wants to be, it would have to measure up to Facebook, Instagram, and TikTok in terms of overall engagement—and that will be difficult.

And so, here we are – a new era of D2C streaming where the kingpin is opening its platform to advertisers, and offering its service to consumers, “on the cheap”.

As investors applaud this move, the question now becomes, who follows suit.