Will Stalling Growth and Stakeholder Jitters Force Netflix to Explore Advertising?

New MIDiA report analyses how Netflix can regain momentum after Q2 2019 misses and data showing 26% of its paid subscribers respond favourably to relevant ads

London(26 Jul 2019)

Netflix, the world’s leading streaming service fell short of its quarterly membership target, with subscribers increasing by 2.7 million rather than the five million forecasted, which led to a 11% drop in its market capitalisation.

Netflix also lost subscribers in the US – its core domestic market, down from 60.2 million to 60.1 million, highlighting the tech major’s growing struggles to both expand and retain is subscriber base. MIDiA Research’s latest video report, Netflix After Q2 2019: Post Peak or Strategic Reset, examines the challenges mounting against Netflix and how it can address them to regain momentum. 

The report highlights that Netflix needs to recalibrate both its engagement and its revenue mix to win over the next 150 million. In the era of stalling membership growth, the previously unthinkable becomes thinkable and the A word – advertising – becomes strategically pertinent.

With the negative frontline numbers looming, Netflix took the unprecedented step of publicising streaming numbers for its global hit show Stranger Things 3, which garnered 10.1 million viewers per episode.

The streaming giant expects Stranger Things fandom to be a driver of renewed subscriber growth in Q3, but Netflix has its work cut out to return to growth, especially with the imminent launches of well-funded direct-to-consumer propositions from Q3 2019 onwards. 

Key takeaways from the report:

• With Netflix paying subscribers 6% more likely than the average consumer to pay attention to brands that sponsor shows, than those that just have ads, Netflix is currently sitting on found revenue if it proceeds with its gate keeper strategy
• Netflix could be the right digital platform to integrate dynamic product placement, which would provide non-intrusive ad revenue for the streaming service and provide brands with access to the 26% of Netflix’s valuable paywalled subscriber base who respond favourably to relevant ads
• Growth is slowing in digitally saturated western markets and emerging markets represent the next big growth phase, but a sophisticated and pragmatic approach to content strategy will be required to ensure return on investment.

This report will be available to download free from Tuesday 30 July, for MIDiA clients and newsletter subscribers.

About MIDiA Research

MIDiA Research is an analysis and data company focused on the intersection of media and technology. With proprietary data, MIDiA provides its client base of leading global media and tech companies with reports, analysis and data tools that provide unrivalled insight into the rapidly changing digital content marketplace.