The Streaming Landscape has generally been the same for a good amount of time. YouTube has always been a free-short form AVOD Model while Netflix has always been a long-form SVOD Model. You can learn more about these two advertising models here. It’s safe to say that Netflix hasn’t had the most successful couple of months. The Q1 reports resulted in a loss of 200,000 subscribers compared to its Q4 results from last year, and that number could rise to 2 million come the Q2 results of this year. Furthermore, after reporting a loss of subscribers for the first time in a decade, Netflix laid off 150 of its employees which didn’t help the problem at all. However, the future for Netflix still shines bright. Productions are still going strong and from a business standpoint, there are a lot of exciting opportunities Netflix is diving right into. Let’s explore what some of those opportunities might look like.
Netflix & Sports
Live Sports has been something that Netflix hasn’t really dived into as of yet. Sure, they have a lot of sports content and documentaries, but with a lot of the major sports being featured on FOX CBS NBC, and ABC, Netflix just hasn’t had the opportunity yet to enter the world of live sports. And with Netflix already investing heavily in their original series, it seems that there isn’t enough money for live sports just yet.
For a company as big as Netflix, one of the biggest questions that come up is why hasn’t Netflix considered streaming live sports? It’s a question that Netflix CEO Ted Saranados said Netflix isn’t looking to do in the future. Saranados went on to mention that the path for major revenue needs to be there.
Saranados might get his lucky break and acquire the viewing rights to be a major catalyst in the world of sports. Currently, Netflix, NBCUniversal, and ESPN are in a bidding war to secure these rights to license Formula F1. Currently, ESPN placed a $70 million bid for the rights, 30 million below the asking price of $100 million. Although Netflix comes at a disadvantage when compared to NBCUniversal and ESPN for live-sports viewing rights, getting rights to Formula F1 would be huge for the franchise. Going back to 2019, F1 had $2 billion in total revenue across the world. The sport has been growing heavily in the US and from a worldwide perspective, this deal makes sense.
It’s no secret that Netflix has invested heavily in the gaming industry. Recently, Netflix acquired Next Games back in March, a mobile gaming development company based in Finland in a 65 million euro deal. Before that, they acquired Night School Studio, a gaming studio best known for developing the game Oxenfree. It’s clear that the intent to add a major player to their streaming platform is there, but why is Netflix spending this much money on gaming? It’s simple. Netflix is investing heavily into gaming because it’s an attempt to gather more attention to the platform. With companies like Disney and Amazon especially investing heavily into different industries like gaming, Netflix needs to keep up with these platforms in order to retain much of its subscriber base.
In a recent interview with TechRadar, WatchMojo CEO Ashkan Karbasfrooshan talked about how Netflix will not stop when it comes to being ambitious about Netflix Gaming. “The main benefit of this is humility,” Karbasfrooshan told us. “I have a ton of respect for Reed Hastings and Ted Sarandos. But in a few years, they went from scrappy outsider to central command for hubris in Hollywood. Snap Inc. [the company behind Snapchat] used to be a cocky place, then when Facebook copied its product, founder Evan Spiegel was served some humble pie – which we all need. So while [Netflix’s] losses will, in the short term, make [company executives] question themselves – which is a natural feeling for humans – long-term that’ll make Netflix a more formidable competitor, one that will appreciate that success isn’t a fait accompli nor its god-given right. I realize I may not be accepted to Netflix parties in the future for saying that…” It will be certainly interesting to see how Netflix Games Makes an impact on the business.
Is Netflix Considering Adding an Ad-Based Model?
It’s been heavily considered for a good amount of time whether Netflix would transition into an Ad-Based Model. In an article conducted by Eddie Makuch from Gamespot, Netflix is considering a less-expensive ad-based model that would see the potential monthly cost of Netflix drop to $15 per month. HBO Max and Peacock already have a similar model to what Netflix plans to initiate, with their plans costing $10 per month and $5 per month respectively.
To add to this, Netflix is considering acquiring the mega-streaming platform Roku. Roku first went public back in 2017 and has since seen a 7.5% increase in its stock price since the news of Netflix possibly buying Roku broke out. If Netflix buys Roku, it would be very unique for Roku to add its idea of streaming ads if Netflix wanted to consider other ways of making ads.
Disney+ is already planning on implementing an ad-based model sometime this year. Although the amount of time spent on the Ad-Based Model has dropped 46.6% since last year, Ad Spending is expected to increase up to 57% by 2025. The opportunity to make significant revenue from an ad-based model is there.
The future for Netflix is very bright amid the current issues they are facing. Netflix may enter the live-sports market if they secure the viewing rights to F1, Netflix is continuously expanding on the gaming front, and by implementing an ad-based model Netflix can really capitalize on an area of advertising that is really taking a boom. Historically, Netflix has been a profiting business, and I have no doubt that Netflix will overcome its recent struggles and make big moves in the next few years on the business side.