retail news in context, analysis with attitude

by Kevin Coupe

CNBC has a story about how Netflix, at the same time that it is spending $8 billion a year on more than 700 original shows and movies, also is experimenting with advertisements on its programming that promotes these shows to viewers.

Viewers who, the story suggests, are not amused.

The CNBC story says that a new study donE by an outside company concludes that 23 percent of Netflix customers would drop their subscriptions if suddenly commercials - even if just for other Netflix shows - started showing up on its content while only 41 percent said they would “definitely or probably” keep their subscriptions even with ads.

The story goes on to say that “the study found that if Netflix offered a lower subscription price to offset ads, it might retain some subscribers who would otherwise leave the streaming service. If rates were lowered by $3 per month while including ads, the percentage who said they would cancel drops from 23 percent to 16 percent, while 50 percent said they would likely stay subscribed.”

It is an interesting problem … because one of the things that Netflix wants to do, since it is spending all that money on programming, is keep people watching Netflix, and not shifting to Amazon Prime Video or some other service. And yet, because people are paying for Netflix, there is resistance to the idea of having to watch commercials.

There’s also another question that Netflix has to consider - just because people say they’ll drop their subscriptions, does that mean they actually will? After all, the story notes that, for example, Amazon Prime Video programs contain ads for other Amazon shows; if you’re watching “The Marvelous Mrs. Maisel,” for example (and you should - it is terrific), an episode might be preceded by a brief commercial for “Bosch” (which you also should watch). And yet, there have been no reports of rampant Prime Video desertions.

I might be a prime - no pun intended - example of this. Asked how I would react to commercials, I probably would be negative (though I would not go so far as to say I’d abandon Netflix); but I also use Amazon Prime Video all the time, and can’t remember being particularly annoyed by the trend there.

I do believe that this is illustrative of decisions that a lot of businesses have to make, and questions they ask themselves. How far is too far? (It depends.) Is there a difference between what customers say and do? (Often.) Is there a point when a company’s self-interests conflict with the interests of its customers? (Sure.)

The best answers to these questions, I believe, are the ones that customers ultimately perceive as being in their best interests, and that they see as being respectful of their time and attention. That doesn’t always mean not advertising … if I like one program, it may be in my best interests to know that there are others I would like as well. Just as, if there are products that I like in a store - whether it be fresh produce, a particular shirt, or a pair of running shoes - there are others that might appeal to me.

In the end, I think, it is important to keep one’s Eyes Open … to be conscious of these conflicts, to be open about discussing them, and to make it culturally acceptable to walk away from certain opportunities when they seem more focused on the short-term than the long-term.
KC's View: