According to a report from Bloomberg, Netflix (NASDAQ:NFLX) is reportedly planning to remove advertisements during kids’ movies and TV series, keeping kids’ programming free of commercials when the company introduces its advertising-supported service. This would keep kids’ programming free of commercials.
In addition, there is a possibility that certain production companies will not allow the streaming company to broadcast advertisements during certain shows or movies that the company has licensed. However, Netflix could get around this limitation by broadcasting advertisements before or after the program.
In addition, it’s possible that when Netflix’s original movies are first made available, the streaming service may not place advertisements throughout the films but will do so later. This move may help alleviate some of the concerns that filmmakers may have about advertisements taking attention away from their work.
When compared to the fall of 28.8% that the Zacks Consumer Discretionary sector saw over the same time frame, Netflix shares have decreased by 60% so far this year.
The Strenuous Rivalry Provided by Disney+ Constitutes a Challenge for Netflix
Netflix is moving in the same direction as its chief competitor, Disney (NYSE:DIS) owned Disney+. Disney+ made the announcement in May that preschoolers who use their profiles to watch content on the ad-supported tier of the service will not be exposed to any advertisements.
The total number of members of Disney+ increased to 152.1 million during the company’s third fiscal quarter, which concluded on July 2, and the streaming giant attracted 14.4 million new customers over April-June. Over 221.1 million people are currently subscribed to one or more of Disney’s streaming services across the globe. These services include Disney+, Hotstar, Hulu, and ESPN+. The latest advances have allowed the firm to pass its primary competitor, Netflix, which had 220.7 million customers at the end of the second quarter.
Many groups, such as the American Psychological Association, have advocated for more stringent regulations on advertising that is directed toward children. Alphabet (NASDAQ:GOOGL) YouTube, which is owned by Google, has recently implemented official restrictions that limit the amount of data that it and content creators can gather on children-oriented videos.
As part of a settlement to put an end to investigations into allegations that YouTube improperly collected the personal information of minors without the agreement of those children’s parents in 2019, the corporation was handed a fine of 170 million dollars by the US Federal Trade Commission (FTC).
Netflix to Launch an Ad-Supported Tier With Lower Monthly Fee
Netflix announced in June that it plans to introduce an ad-supported tier that advertisements will finance to cut down on its operating losses and attract more users to the platform. As part of an initiative to make Netflix more appealing to customers concerned about their spending habits, the new tier will have a lower monthly fee than the current ad-free subscription.
The streaming plan with the most subscribers on Netflix in the United States now costs $15.50 per month. This follows a series of fee increases that were implemented to help pay for the company’s original programming, the relevance of which increased when Disney removed its programming and classic movies off Netflix following the expiration of licence agreements between the two businesses.
Netflix is currently renegotiating partnerships to put advertisements on its platform. The company plans to launch initially in nations with more developed advertising markets.
Netflix has seen a decline in its customer base and has formed a partnership with Microsoft (NASDAQ:MSFT).
Microsoft will provide the infrastructure to power the ad-supported streamer tier that Netflix aims to deploy at the beginning of 2023. Through the sale of advertisements on various its services, including the Bing search engine and the LinkedIn social network, the software giant pulled in a total of $10 billion in advertising revenue in the previous fiscal year.
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