MIDiA: Netflix needs to recalibrate engagement, revenue mix
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Joseph O'Halloran
| 26 July 2019

On the back of the SVOD service falling short of its quarterly membership target, leading to a 11% drop in its market capitalisation, MIDiA Research believes that the stalling growth and stakeholder jitters could force Netflix to explore advertising.

MIDiA’s study, Netflix After Q2 2019: Post Peak or Strategic Reset, examines the challenges mounting against Netflix and how it can address them to regain momentum, specifically looking at how the service may take up advertising, predicted by a number of sources over the course of the last weeks.

The analyst says that fundamentally the loss of subscribers in the core domestic market — down from 60.2 million to 60.1 million — highlights Netflix’s growing struggles to both expand and retain customers. It adds bluntly that the company has its work cut out to return to growth, especially with the imminent launches of well-funded direct-to-consumer propositions from the likes of Apple and Disney for the third quarter of Q3 2019.

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, MIDiA believes that Netflix is currently sitting on found revenue if it proceeds with its gate keeper strategy. It adds that despite the current gloom, 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.

The Netflix After Q2 2019: Post Peak or Strategic Reset report concludes by stating that even though 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.