February 14, 2019
Anna Hubbel, writer at AdvertiseMint, Facebook ads company
Even though Netflix is considered the gold standard of video streaming services, it may be forced to rethink its business model if it wants to survive.
Presently, Netflix runs off of paid subscriptions to offer streaming without ad interruptions. However, customers weren’t thrilled when the service increased its price by 13 to 18 percent at the beginning of the year. In fact, 27 percent of subscribers said they either are considering or planning to cancel their Netflix subscription as a result, but more than half said they are open to an ad-supported option if it meant a lower cost.
Is advertising in Netflix’s future? The rise in streaming competition suggests that it is.
More companies are launching their own streaming services, giving customers more selections. In 2019, AT&T, Disney, and Viacom are slated to release their own streaming services, along with NBCUniversal in 2020. Not only do these services offer competitive pricing, but they may also take away their content currently available on Netflix.
If Netflix wants to keep its non-original content by these major companies, it will have to pay big bucks, but that’s only if the companies are willing to continue allowing their content on the service at all.
Emarketer says Netflix should consider an ad-supported option so it can keep its customers by offering lower subscription costs. According to a 2018 survey, 73 percent of adults who use video streaming services say they watch ad-supported video. Further, 59 percent said ads don’t bother them if they can watch what they want, and 56 percent said they’re okay with ads if it means a lower overall cost.
Hulu, as an example, had 40 percent more viewers on its ad-supported service year over year in 2018. Additionally, less than 40 percent of Hulu subscribers pay the extra four dollars for an ad-free experience, which means they don’t mind the ads. Emarketer forecasts Hulu’s ad revenues totaling more than $500 million by 2020.
“Pure subscription services like Netflix will, at some point, have to resort to additional monetization options (i.e., advertising),” Emarketer principal analyst Paul Verna said in the article. “It’s also true that hybrid models will also face upward pricing pressure.”