Netflix introduces big changes - hit or miss?

Netflix introduces big changes - hit or miss? Netflix has announced some sweeping changes on its platform. Will these recent updates enhance the Netflix experience? Shashank Venkat chimes in on the hottest debate in the subscription world
 
Be it technological changes, feature announcements or strategic acquisitions, Netflix never stands still and is always looking for new ways to enhance the user experience. Over the past few days, Netflix has announced a slew of radical changes on its platform. While some of these new features may be controversial, others appear to be focused on long-term growth and engagement. Here are our thoughts on the latest updates:
 
Say Hello to Ads
 
Advertisements are the antithesis of the entire subscription business model. However, Netflix plans to challenge this perception by introducing ads between its shows. But, these are not the typical ads that you would expect to see on commercial television stations. These are promos of Netflix shows and movies which will be featured in-between episodes of other programmes.
 
Netflix will only feature promos of its own shows and movies, and not promote third-party licensed content – rather like the trailers shown to UK residents by the BBC. The company confirmed this to Ars Technica which first reported the news, stating that it has been testing ads only with a few select users. Netflix calls these new promos ‘recommendations’, and it wants to use the feature to test whether subscribers discover other shows of their interest. Netflix has clarified that it will roll the feature out to a broad segment of users only after seeing how the test segment interacts with these promos. It has also said that these promos are entirely skippable, contrary to some opinions on social media.
 
However, the subscription platform faced a huge backlash on social media after users came to know about the promos. Subscribers clearly don’t want to be interrupted during their favourite shows and movies, and many have pointed out the fact that Netflix showing ads defeats the whole idea of a paid subscription.
 
While we understand where Netflix is coming from, its subscribers clearly do not see much value behind trailers in between their favourite shows. As a power user of Netflix myself, I think that the existing recommendation features do a good enough job of helping users discover new content. In addition, Netflix also features auto-play videos while browsing through their content library. In such a scenario, do users need another ‘recommendation’ feature? We think this one’s a bit of a stretch!
 
Bypassing Apple’s App Store fees
 
Recently, Apple became the first company to reach one trillion dollars in market cap. While a big chunk of their revenue comes from hardware sales, the company’s services vertical, which includes subscriptions, has also been growing consistently. Apple currently takes a 30% cut on a user’s first subscription and 15% for renewals from businesses like Netflix. With Netflix having one of the top grossing apps on the iOS app store, the company realises that it may be losing a lot of money to Apple.
 
Whilst Wall Street is constantly posing questions, Netflix is now looking at ways to garner a higher chunk of revenues from its Apple users. Specifically, Netflix is looking at bypassing iTunes and redirecting users to subscribe directly via its own app or web version. The company is currently trying this ‘direct billing’ feature in 33 countries.
 
The convenience of iTunes is great for start-up businesses, but as these companies grow, the eye-watering fees that Apple charges means that many are now looking at taking back control of their subscription billing. So it makes sense for Netflix to try and wrest some initiative from Apple, with other companies such as Spotify having already moved users away from iTunes payments. Whilst Apple is also planning to launch its own video streaming platform, it is also wise for Netflix not to cede ground to a potential competitor. The company did the same with the Google Play Store earlier this year as well.
 
Following a muted quarter combined with a general saturation in subscription growth, bypassing App Store fees may be a good way to beef up its margins. Wall Street has already given this move the thumbs up as the Netflix stock bounced back after a six-day losing streak. Will users ditch the ease and convenience of subscribing through iTunes for a direct billing relationship with Netflix?
 
No more user reviews
 
Netflix has been hinting for quite some time about its love-hate relationship with user reviews. Last year, the company changed the original star ratings review system to a simple ‘thumbs up-thumbs down’, but it has now shut down reviews completely claiming that users were not interacting much with the reviews lately. Netflix subscribers will now have to rely completely on the company’s algorithms for suggestions on new shows.
 
From my own experience, I never relied much on Netflix reviews for discovering new shows and movies anyway. Since the platform itself did not give much credibility to users’ ratings, they were never integral to the Netflix experience. User reviews, however, do hold a place of pride on platforms like Amazon.
 
Amazon Prime Video and Netflix: Different approaches 
 
This Inc article offers a useful comparison between the radically different strategies employed by Amazon Prime Video and Netflix. The former is heavily focused on reviews, as that is a huge part of the core Amazon experience. If you have tried accessing content through Amazon Prime Video, you will have been immediately struck by the amount of information and user feedback available around shows and movies.
 
In addition, Amazon Prime Video has always showcased promos for other shows at the start of a programme or movie. Users are accustomed to seeing sponsored content on Amazon right from the start, so maybe it doesn’t feel very intrusive.
 
Netflix, on the other hand, has always focused more on content. So, anything that takes the attention away from its content is subject to a lot of criticism. Part of a good subscription experience is also preserving its core, and Netflix may do well to revisit that lesson!
 
What do you think about these changes - thumbs up or thumbs down? Do let us know in the comments below.