Netflix Has Created a Huge Upside for Brands — but Now Must Monetize Better

Netflix continues to adapt its approach to entertainment — not just with content but also by incorporating intriguing brand integrations within shows such as Stranger Things, a practice that gives branding partners free advertising and Netflix more awareness and merchandising opportunities. But as Netflix grows its global subscriber base amid increased competition and attempts to offset its production costs (and, dare we imagine, someday make a profit), the pressure is mounting to monetize its brand integrations and possibly accept traditional advertising.

Netflix’s Q2 Curse Strikes Again

Within a few short weeks, Netflix has:

• Lost popular content to competitors. Both Friends and The Office are exiting the platform in 2020: Friends to WarnerMedia’s new streaming service, HBO Max, and The Office to NBCUniversal’s forthcoming streaming service.
• Even worse, lost subscribers. This month Netflix shocked investors by announcing in its quarterly earnings that it had lost subscribers for the first time in eight years — a combination of a price hike and a content lull. Netflix said it lost 126,000 domestic paid subscribers, when analysts had expected a 352,000 gain. In the aftermath of its earnings miss, Netflix’s stock price suffered a 10 percent decrease.

It’s not the first time Netflix missed its subscriber addition projections. These setbacks have sparked another round of speculation that Netflix will need to abandon commercial-free streaming and start accepting advertisers to offset the rising costs of producing original content.

Authentic, Story-Driven Co-Brands Offer a Glimmer of Hope

Amid the bad news, Netflix has already demonstrated how it might generate additional revenue streams — not with traditional ads but through inventive co-branding efforts that capitalize on the popularity of its original content — with Stranger Things being a case in point.

Netflix’s tent pole series Stranger Things 3 has attracted 40.7 million viewers, more than any other Netflix film or series, in the first four days of its release. Those are impressive numbers at a time of media fragmentation, when it’s increasingly difficult for any…