Netflix has been selling a “Netflix effect” since 2011, when its “original content” business started to grow in Ireland.
The term refers to a trend of people switching to streaming video content from other sources in the hope of paying less for it.
Its rise is also linked to a surge in subscription television subscriptions, with consumers increasingly subscribing to pay TV services, including S4 and Sky.
“The Netflix effect” was first coined by economist James Quesnel, who coined the term in 2014 to describe how consumers began to tune in to streaming videos.
His analysis suggested that Netflix’s “original” content business was a driver of this phenomenon.
Netflix also began to boost its advertising business, which included the launch of a series of TV adverts.
In 2017, Netflix said that its “advertising revenue” grew more than 40 per cent in the first half of 2018, which was up from its prior year.
However, Netflix’s share of Irish TV advertising fell by 7 per cent to just under 10 per cent last year.
The Irish broadcaster said that “Netflix effects” were the result of many factors including a decrease in ad revenue and a reduction in advertising spending by content creators.
However this year, the industry regulator, the Oireachtas, said that it would be possible to introduce a measure to ensure that advertising revenue is not lost if advertising spending is reduced.
The move would be a “game changer” for the industry, said Brendan Walsh, the chief executive of TV3, a national broadcaster and broadcaster group.
“This is a huge step forward for the Irish industry and for the public broadcaster,” he said.
The company is working on ways to reduce advertising costs, he said, adding that its aim is to achieve revenue that is comparable to that achieved by rival pay-TV operators in Ireland and that will allow it to offer viewers more choice of content.
However he said the regulator has not taken a position on the impact on advertising revenues.
“It’s important that we have transparency and that we are clear about what we are looking at,” he told the Irish Independent.