NETFLIX & THE FUTURE OF AD-FREE TV

The Bluths are flexible, inexpensive and commercial free. But only on Netflix.

 

In the five years that I have lived in Toronto, I did not own a TV. Buying a TV used to be a huge financial and personal commitment. You couldn’t just buy a TV ($500), you had to get cable ($50/month), a Blu Ray player ($80) and then buy some Blu Rays and DVDs to play on it ($25/BR or DVD). And to make it all worth it, you had to have the time to watch it.

Then Netflix came to Canada and changed my life. I now have a TV ($500) and a little black box called the Apple TV ($99) and together, they allow me to watch unlimited movies and TV shows for a small monthly fee ($8) with a flexible schedule and no commercial breaks. Like me, 36,300,000 others over the world have discovered the inexpensive, commercial-free joys of Netflix.

Netflix has not only changed my life, but is slowly changing the future of entertainment media and along with it, traditional advertising. Back in the day, television networks were needed because they had the hardware to actually bring television programming into our homes. Today, cable TV and Internet streaming services have rendered television networks practically useless (besides, you know – advertising and production), but our entertainment model is still revolving around them.

Netflix has now begun producing original content. The streaming service now has 10 original shows in the works or currently streaming (Like ARRESTED DEVELOPMENT!) – and they say this is just the beginning. Netflix believes that Internet TV is the future of media consumption and will eventually phase out traditional network television. Advertising is and always has been a big part of network television. Fees charged for advertising spots used to and still do, pay for the production of shows, which meant that advertising has always defined the demographics and the genre of television shows on a particular network. Where is advertising’s place in this futuristic world without network television?

Potential outcomes include:

  1. Netflix allows advertising – but only highly targeted and relevant advertising based exclusively on their data.
  2. Netflix sells data to advertisers. There may not be advertising, but the data is still useful for Market Research.
  3. Network television does not phase out because Netflix makes a huge mistake and ruins everything they’ve been building and we’re back in the television advertising game, so we have nothing to worry about.
  4. Netflix allows advertisers to sponsor programming and shows will be named in the following format: “Ben & Jerry’s presents: Arrested Development”.
  5. Product placement becomes the new content marketing and you see brands so much, that all movies look like the Transformers series.

Do you think network television will be phased out eventually? Where do you see advertising in a future like this?

  • http://saadullah.tumblr.com/ Saadullah Khan

    Good post! I think network TV still has a place in the world, especially given the rise of reality TV and the inevitable demand for live events (Sports, award shows, News..etc). That being said Netflix may decide to sell data and we could see something similar to RTB happen in the TV space where behaviourally targeted ads are sold in real time.

    • tanviswar

      I agree that Network TV still has a place in the world (for now). The system is too complex for it to shut down any time soon (perhaps even at all), but I definitely think we are slowly but surely shifting the entertainment media model. I think one day it will definitely be possible to view live events on Netflix much like the way we watched Felix Baumgartner’s jump on Youtube.

      Thanks for your comment!

      • Robbie Moraes

        Not Likely.

  • Polyenthusiast

    I think it’s only 36.3 million subscribers, but still a giant number, and with every original series these numbers keep getting boosted.

    However, I’m not sure how sellable the data is unless we look at subscribers as household groups. For example my parents, who live 2 hours away from me in a tiny rural town, use my Netflix account. I still get movies suggested for my tastes because they usually don’t bother rating what they’ve viewed, but my viewing history isn’t an accurate reflection of what I, the account holder, actually watches. I think that Netflix could to capitalize on this by giving each member of a household their own “channel” (and in the case of kids maybe a general “youngsters channel” with no specific info to protect the privacy of minors).

    The fact is that Netflix needs more than just subscription income to keep paying for licensing fees while keeping subscription costs low (remember when they tried raising prices and their stock price plummeted?). Consumer studies have shown that people generally don’t mind being shown some advertising so long as it really applies to them. Hulu has done a great thing by allowing you to “pick your experience” prior to hitting play so that you can watch an ad that’s interesting to you.

    Either way, if Netflix does it right, we all win.

    • tanviswar

      I love the idea of everybody having their own “channel”. I do agree with your point that this data isn’t exactly accurate. Not to say that any data is precise, but the fact that people share their Netflix passwords definitely makes a big difference.

      I’m curious to see what Netflix would be like with advertising. If it’s highly targeted, I think it would be interesting – but again, with one Netflix account being used by more than one person, it would be difficult to tailor the advertising to a specific individual or even group.

      Thanks for commenting!

    • Robbie Moraes

      No, they don’t. We are the losers for buying their add lipped Crap.

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