Netflix Told To Sell Advertising As Subscriber Numbers Face Pressure

As demand for Disney+ soars Netflix shares have tanked after analysts worked out that Netflix face losing millions of subscribers and popular programs, when new competitors are launched into the market in 2020.

Currently Disney is on a massive roll with their movies netting over $14 Billion in cinema’s during the past 12 months, now analysts are warning that Netflix needs to start selling advertising to bolster revenues from the loss of subscribers.

Last night Netflix shares fell 2 percent to $296.39 with analysts claiming that their current subscription fees have become “unsustainable” amid increased pressure from cheaper platforms offered by the likes of Apple and Disney, Needham & Co.’s Laura Martin said in a research note.

The option for Netflix is subsidised advertisements that matches its competitors’ price point of US$5 to $7 a month, according to Martin.

Netflix “has consistently stated it will not have advertising, which we believe will result in sub losses,” Martin wrote. The company had about 60.6 million paid members as of Sept. 30.

Netflix has an imperative to offer a cheaper streaming plan as its valuation appears closely tied to subscriber growth and its US members are more profitable than their international counterparts, Martin wrote.

Disney+ became Netflix’s latest high-profile competitor this was followed by Apple TV+ service.

More pressure will come in 2020 from NBC and HBO’s forthcoming streaming platforms, which will take the hit sitcoms “The Office” and “Friends” from Netflix in the coming years, according to Martin.

Licensed shows like those generated more streaming minutes for Netflix this year than the company’s original productions, Martin said.

But Bloomberg Intelligence analysts see Netflix maintaining its stronghold on the industry thanks to its original programming.

Martin Scorsese’s mob epic “The Irishman” and the royal drama “The Crown” helped drive a 15 percent spike in Netflix’s global downloads last month even as Disney+ got off the ground, Bloomberg Intelligence’s Geetha Ranganathan and Amine Bensaid wrote Tuesday.

“We think Netflix will retain its dominance in the near term, as its large content budget allows it (to) keep producing potential hit shows that draw audiences back to its platform,” they wrote.

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David Richards

David Richards has been writing about technology for more than 30 years. A former Fleet Street journalist, he wrote the Award Winning Series on the Federated Ships Painters + Dockers Union for the Bulletin that led to a Royal Commission. He is also a Logie Winner for Outstanding Contribution To TV Journalism with a story called The Werribee Affair. In 1997, he built the largest Australian technology media company and prior to that the third largest PR company that became the foundation company for Ogilvy PR. Today he writes about technology and the impact on both business and consumers.