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A few days ago, some netizens found that iqiyi imposed restrictions on screen casting on mobile App. Iqiyi Gold VIP members originally supported 4K definition video, but now even Golden VIP only supports 480p definition. Iqiyi customer service responded that Gold members can be used on computers, tablets and mobile phones, and can use 480p definition to display the screen.

Photo / Weibo screenshot it's hard to imagine that by 2023 VIP members of the video platform can only watch 480p videos, and even HDMI cable screens will be restricted. As many people say, in essence, iqiyi is asking users to subscribe to more expensive TV members in disguise. Despite the ugly taste, one of the main factors driving iqiyi to do so is that streaming has not made much money financially-member income has long been unable to cover the cost of content.

This is not a unique problem for domestic streaming platforms. According to Business Insider, Apple is also looking for an advertising sales director for Apple TV+ to seek advertising revenue to fill the black hole of high content cost. It has been reported that Apple plans to launch an advertising subscription program for Apple TV+ in 2023.

Apple TV+ "for all mankind", Picture / Apple this is another mainstream subscription streaming service that will launch an advertising program after Netflix and Disney+ launch an advertising subscription program to expand revenue. Once upon a time, one of the core selling points of subscription streaming media was to provide an ad-free, immersive use and viewing experience.

Up to this point, apart from bilibili, who is still taking a clear-cut stand against patch advertising, both major overseas streaming media and domestic Aiyouteng (iqiyi, Youku, Tencent) seem to be telling us:

Subscription streaming media is also inseparable from patch advertising.

The price increase can not catch up with the cost, and Apple has long had the idea of launching a subscription plan for Apple TV + advertising. According to reports, Apple held early talks with media organizations in the fourth quarter of last year to discuss the sale of advertising space for Apple's original content and live sports, which is expected to be similar to Netflix and Disney +.

As of January, the price of Netflix subscription plan, figure / Netflix official website last October, Netflix's advertising subscription plan was officially announced, the subscription fee is $6.99 per month, and the standard subscription plan (no advertising) is $9.99 (which has since risen to $15.99). Subscribers to the ad section will see 4-5 minutes of ads per hour, ranging in length from 15 to 30 seconds, appearing at the beginning and in the middle of the video-known as "patch ads", Netflix said. In addition, there are some movies and TV dramas that cannot be watched because of copyright in the advertising subscription program.

Two months later, another streaming giant, Disney, also launched a subscription fee for the advertising version of Disney+, at $7.99 a month, while the subscription fee for an ad-free version rose from $7.99 to $10.99. In terms of advertising, Disney promised that sticker ads would not be broadcast for more than four minutes per hour, no ads would be displayed on preschool accounts, and there would be no targeted ads under the age of 17.

By contrast, as of January, Apple TV + had a subscription fee of $6.99 (up from $4.99 in the early days), allowing users to watch all content, including 4K shows, without ads.

Picture / Apple is not Apple conscience. At present, Netflix and Disney + are the largest players in the overseas streaming market. By the end of the third quarter of last year, the total number of Netflix global subscribers exceeded 223 million, and the total number of Disney + global subscribers reached 164.2 million. Paramount Paramount+, Apple TV +, Hulu, HBO Max and other subscription streaming services still have a big gap in the number of users and the number of content, and the prices are generally lower.

Naveen Chopra, chief financial officer of Hollywood giant Paramount, said last year: "to be fair, pricing is going up across the industry-including a number of competing streaming platforms. "

China is no exception.

On April 20, last year, Tencent adjusted the prices of Tencent Video VIP and super film and television VIP members-Tencent Video VIP monthly plan, Tencent Video VIP annual card, and super movie VIP member prices increased by 5 yuan respectively, of which Tencent Video VIP, the largest one, rose from 218 yuan to 238 yuan in a row. Since 2020, iqiyi has raised the price for two consecutive years, and the monthly price has risen from 15 yuan / month to 25 yuan / month, which is basically the same as the membership price after the price increases of Tencent Video and Youku.

Everyone knows that higher subscription fees will certainly affect the growth of the number of subscribers. But the current situation is that the war of streaming is far from over, and the core means for the platform to win more users is to increase the investment in content, including more exclusive and more attractive homemade and purchased content.

Nearly 1/4 of Netflix users plan to cancel their subscriptions by the end of the year, according to a survey released last year by reviews.org, a US rating website. Among them, 2% of respondents said it was mainly due to soaring subscription fees, while another 1% said Netflix's content was no longer attractive.

This is the dilemma of the streaming platform: if the price increases, fewer users will be willing to subscribe; without the price increase, there will be no more money to invest in content and attract users to subscribe.

Advertising, or advertising revenue, can break this dilemma to some extent, not only keeping subscription fees relatively low, but also allowing the platform to continue to invest in content to attract more users to subscribe.

Advertising is not a "lifesaver", but it will be the key "military food" of the streaming media war. Netflix, as the best representative of the streaming media model, has been sought after by users and the market for a long time. Its business model is very simple, the core revenue is user subscription revenue, which is only directly related to "subscription price" and "number of subscribers", but the former can not be increased at will, while the latter is the key to the rapid growth of Netflix for many years.

The number of Netflix subscribers is changing, figure / Statista until 2021, the number of Netflix subscribers has maintained a strong growth, the growing number of subscribers also means that more and more users subscribe to revenue, Netflix can continue to invest heavily in creating homemade content around the world, and then attract video users in the global market. But by the first quarter of 2022, Netflix suffered its first decline in subscribers since 2000, magnifying the fact that the number of Netflix subscribers has stagnated in the last four quarters.

The problem is that subscription streaming media, including Netflix, cannot raise prices at will. Denial will only dissuade more subscribers, and they have experienced price increases many times before. In addition, if the number of subscribers and prices remain unchanged, revenue will not move, and there will be no more money to invest in creating homemade content to attract subscriptions and to face competition from other streaming services at the user and content level.

Streaming media all over the world are facing the same dilemma, Disney + and Apple TV + are just the beginning, and more and more streaming media platforms may launch their own advertising plans one after another. The same is true of Aiyou Teng, and even started the patch advertising business in China a long time ago.

Not even just patch advertising, photo / iqiyi, but according to Wall Street analyst Michael Nathanson, advertising will generate $1 billion in revenue for Netflix in 2023 and $2.7 billion by 2025. By 2027, Netflix's advertising revenue will grow to $3.5 billion, accounting for 9 per cent of the company's total profits.

From this point of view, advertising revenue will not and cannot become the main revenue of Netflix.

Netflix has always believed that the number of subscribers and revenue are still the most important core of the company. When announcing the launch of ad-supported subscriptions, Netflix said it would help it win over a new customer base and bring the joys of streaming to less well-off viewers. In other words, the core goal of Netflix's advertising program is to boost user growth through cheaper programs.

But in the short term, adding patch ads to subscription streaming media is still a big challenge. Since the advertising subscription program, which costs $6.99 a month, was launched in November, users of the program have accounted for only 9 per cent of new subscribers in November, according to subscription analytics firm Antenna. Among the subscribers of the advertising subscription plan in the first month, about 57% subscribed for the first time and rejoined, while 43% were downgraded from the more expensive subscription plan.

However, in the long run, patch advertising is still likely to become an important food in the streaming media war. On the one hand, patch advertising is based on the number of times it is played, so it can achieve scale expansion of all content; on the other hand, it is true that advertising will affect the viewing experience of users, but for all video platforms, the core is still attractive content. Users would rather see some ads in order to see attractive content, rather than see some unattractive content because there are no advertisements.

In the Netflix TV series "Women's Prison", the picture / Will Buckner@flickr is just that the subscription streaming service initially claimed to be a low-cost, ad-free viewing experience, freeing us from the constraints of the TV program schedule and attracting us to keep brushing the show. But when all of us are used to or even fascinated by it, streaming platforms collectively start inserting obnoxious ads, as if they were going back to the past overnight.

This article comes from the official account of Wechat: ID:leitech, author: Lei Science and Technology Internet Group

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