Netflix, the New York Times & the Evils of Advertising

By Tien Tzuo February 14, 2020

In the 1970s the average U.S consumer was exposed to about 500 ads a day. Today that number is around 5,000. Ads are everywhere, and they are designed to make you feel bad about yourself.

Ads show parties that you aren’t invited to, houses that you’ll never live in, bodies that you’ll never have. They prey on your self-esteem in order to sell more stuff. They are particularly toxic for teenagers and young people.

Advertising helped bring us the smoking and obesity and prescription drug epidemics. Political ads contribute to a degraded public discourse at best, and outright disinformation at worst (thank you, Facebook!). I could go on.

Fortunately, you don’t need advertisements to run a successful media business anymore.

Case in point: Netflix. Lots of advertising companies are dying to run ads on Netflix, according to last week’s Adweek article “Media Buyers to Netflix: Take Our Money!

Netflix, to its credit, is saying no. In the company’s most recent investor video, Reed Hastings had this to say about competing against Google and Facebook for targeted advertising dollars:

“There’s not easy money there. If we don’t have exposure to that, the positive side is we’re a much simpler place. We’re not integrating everybody’s data. We’re not controversial that way. We’ve got a much simpler business model, which is just focused on streaming and customer pleasure.”

Netflix developed a massive, loyal audience because it focused on great programming with no ads. And now all the advertisers are knocking on their door! Some people just don’t get it.

Here’s how media used to work: content providers like television studios and radio stations and online news sites offered you their work for “free,” and in return you had to sit through a stream of irrelevant advertisements or a scroll through page full of crappy display ads.

Here’s how good media works today: streaming services and news organizations ask you to support the work of their content creators directly through digital subscriptions. That’s it. Nice and simple.

Ten years ago The New York Times, for example, made a deliberate decision to shift from focusing on advertising revenue to digital subscription revenue, and today it’s a huge success story. I remember when the Atlantic declared in 2009 that “at some point soon—sooner than most of us think—the print edition, and with it The Times as we know it, will no longer exist.”!

Last week they announced that and that their digital subscription growth is actually accelerating (they now have over five million subscribers), but here’s the quote that stood out for me:

“The company said it expected to continue generating revenue more from readers than from the advertisers that were once integral to the newspaper business.” Did you catch that? Advertising is no longer integral to the newspaper business.

But let me go one step forward with a prediction: I think that one day the New York Times will stop running ads altogether. Like Netflix, they’ll find that an ad-free product is a massive differentiator in a crowded market.

Ads are evil. And smart media companies don’t need them anymore. Good riddance.

 

For more insights from Zuora CEO Tien Tzuo, sign up to receive the Subscribed Weekly here. The opinions expressed in the Subscribed Weekly are his own, not those of the company. The companies mentioned in this newsletter are not necessarily Zuora customers.

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