Looking at total viewing figures, Netflix is in growth-mode. This month the streaming platform attracted 40 million viewers in the first four days following the much-anticipated release of Stranger Things 3, whilst its biggest ever original show; Orange is the New Black, has already brought in a huge 105 million users – or two thirds of its subscriber base ahead of its final season.
And yet stock price of the California-based giant fell dramatically as it revealed that the number of US subscribers had dropped for the first time in nearly a decade, as reported by the Wall Street Journal.
Netflix had forecasted an additional 5 million subscribers globally in the second of quarter of 2019, but grew by only 2.7 million, results made all the more disappointing as a number of other broadcasters are launching streaming services of their own – including Disney, with its Disney Plus US launch date now set for November.
For now, then, the streaming service appears to be focusing on global growth, especially in emerging markets rather than turning to other business models – but with other players entering the market it is only a matter of time until the platform has to consider moving towards an ad-funded model.
In the past year Netflix has already been investing in “marketing partnerships” – mostly in the form of product placement. US brands from Dunkin Donuts to KFC to West Elm have featured previously within Netflix Originals, but arguably it is the latest series of Stranger Things that is its most branded show to date.
According to one report more than 100 products appeared in the third season alone, equating to over $15 million of brand value, in Netflix’s value exchange model in which no money changes hands. Coca-Cola, in particular, features heavily, and the drinks brand released 500,000 limited edition cans and apparel to coincide with the show’s release as a commitment to cross-promotional marketing activities using the shows IP and assets.
With product placement the most important consideration is how well the product, or the service, is woven into the storyline. While 40% of UK consumers are aware of product placement, according to Ofcom research, almost one in four say they already “feel a concern” over the level of advertising on television. The introduction of a mandatory ‘P’ logo on any UK TV programming containing product placement is helping to signpost and regulate its use in the UK. However there is a loophole – any programming imported from overseas producers is exempt from this rule.
This, has meant that although product placement is not currently available via Netflix in the UK or European markets, as a globally streamed show, it has value far beyond its home market. Netflix are not the only company to have recognised the opportunity: Amazon and Hulu feature brand integrations within 100% and 91% of shows, respectively.
Given Netflix is yet to introduce any form of video advertising, such as pre-roll, brand integration is currently the only way to reach this engaged audience on the platform – although these arrangements are largely limited to US productions and brands with global appeal.
But, in any product placement, brands should think carefully about the viewer’s experience, and whether co-promotion fits naturally within the plot, or is just another diversion from the content – or even stranger things could result.