In the coming days, Netflix can spoil the fun of watching your videos. When you are watching a movie or web series with full engrossment, then only an advertisement can come.
In the coming days, Netflix can spoil the fun of watching your videos.
In the coming days, Netflix can spoil the fun of watching your videos. When you are watching a movie or web series with full engrossment, then only an advertisement can come. And it can come not once but many times. Yes, this is going to be true. The thing is that last month netflix Ltd. has tied up with Microsoft to offer its users affordable, ad supported streaming plans. Due to this, Netflix users can feel cheated, so they take Netflix’s premium plan. Now let us know why Netflix has to do this.
There was growth in revenue during the pandemic
Netflix’s revenue was growing at a rate of 15-25 per cent during the pandemic, but in the last two quarters this rate has fallen to 9.8 per cent and 8.6 per cent. Here the operating margin is also falling. There was a 22.8 percent margin in the third quarter of 2021 and 19.3 percent in the second quarter of 2022. In such a situation, Netflix is seeing a way to earn from advertising.
According to a report, digital advertising spending in the US alone was around $240 billion in 2022 and is expected to cross $315 billion by 2025. Now let’s know the user base of Netflix. The user base of Netflix is around 221 million. After gaining continuous subscribers for a decade, it suffered a loss of 1.2 million users in the first half of 2022.
However, over the years, international markets have proved to be helpful for Netflix. Between the second quarter of 2018 and the second quarter of 2022, US and Canadian customers grew only 18 percent. The number of customers in Europe, the Middle East and Africa increased by 133 per cent and Asia-Pacific by 316 per cent. There is good market scope with around 73 million Netflix subscribers in the US and Canada. The same, the market of Africa and Asia will also prove to be better in the coming years.
Subscription was made cheaper in international markets
Netflix has done a lot of preparation on this front. Netflix has expanded its market by reducing the subscription rate in international markets. The ARPU (average revenue per user) in the US and Canada is almost double that of Asia-Pacific and Latin America. According to an analysis by Comparitech, its ARPU of $9.70 in India was similar to the ARPU in rich countries like Australia, New Zealand, Singapore and South Korea in the first quarter of 2021. The ARPU of Argentina and Brazil is lower by $ 7.40.
On the other hand, Netflix says that 100 million families watch videos through password sharing. More recently Argentina, El Salvador, Guatemala, Honduras and the Dominican Republic have started asking customers to pay additional fees for using accounts in more than one household. This will be introduced in more markets as well. The challenge for Netflix is to retain existing subscribers. Continuously providing high quality content to retain the customers. For this, about $ 17 billion was spent on content in 2021, which is an annual increase of 44 percent.
Netflix CEO Reed Hastings admitted that Netflix would have lost even more subscribers if it didn’t offer its popular series ‘Stranger Things’. At the same time, to increase its customer base, especially in the international markets, it will have to reduce its price without reducing its margins. Ed scheme will work in this.