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How subscription services are adapting their business model for the cost-of-living crisis

After half-a-year of decline for digital streaming services (with Netflix losing 200,000 and 1,000,000 of its subscribers in Q1 and Q2 respectively) financial struggles are pushing people to cancel subscriptions. Streaming giants such as Netflix and Disney+ are looking to introduce a greater variety of tiered options including lower-priced ad-supported subscriptions to meet the different demands of all consumers resulting from the cost-of-living crisis in late 2022 and into 2023.

Netflix has long resisted the appearance of advertising on its streaming platform. However, this is set to change with the introduction of an ad-supported, lower priced subscription tier that will begin to be tested before the end of 2022. The lower-priced membership would be optional, and ads won’t start appearing on existing subscriber accounts. In March, Disney + announced a similar model with commercials available at a lower price later this year.

Netflix co-CEO Reed Hastings commented “Those who have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription. But as much as I’m a fan of that, I’m a bigger fan of consumer choice, and allowing consumers who like to have a lower price, and are advertising tolerant, to get what they want makes a lot of sense.”

So, what does this mean for advertisers? Firstly, the expansion of advertising formats across more streaming services will enable brands to reach more potential customers that are no longer available across Linear TV. These audiences may also be more price-conscious (having opted into the more affordable option).

Netflix has the opportunity to analyse the meaning of its content, and could potentially match advertising demand against this, resulting in super relevant ads. Brands should consider the ads appearing here, ensuring they are fit for platform and align with the high-quality content that Netflix produces.