Netflix considering ad supported tier?

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by Andy Bassett Jul 12, 2019 at 12:26 PM

  • Movies & TV News


    Netflix considering ad supported tier?
    As Netflix positions itself to face the upcoming challenges of a rapidly changing streaming environment, recent research from TDG suggests that a third of its customers would be happy to consider moving to a lower priced tier supported by advertising.
    Of course, the first response to that information is that it means that two thirds would not consider this option - actually reported as 20% sitting on the fence and 49% opposed to switching.

    A separate study from Hub Entertainment Research demonstrated that up to 23 percent of subscribers would most likely drop the service if ads were introduced without an accompanying price drop.

    However, Netflix has not indicated that this is something it is are even considering at the moment but it does give an indication that its customers might be open to such a change. One would assume that the more expensive, non ad based, options would remain in place, meaning that it’s a customer choice rather than something the company imposes across the board.

    Previous research from TDG, a company which provides intelligence on the changes that impact consumer technology, indicated that the most recent price rise has tested customer’s patience. So, without risking losing some of its client base, recourse to further fee increases might not be top of the company’s list of options as it faces off tough competition from the likes of Disney, Apple and WarnerMedia.

    As Netflix loses its third party IP from its library, so too does it lose some of the allure that made it attractive in the first place. New viewers might follow the IP back to its original home and existing customers might look for lesser reasons to jump ship. Price rises are one thing certain to make an existing customer base start looking around at options.

    Despite a long standing refusal to go down the streaming advertising route, Netflix may find the situation out of its hands, says Michael Greeson, president of TDG and SVP of Screen Engine/ASI. As he explains,

    Netflix’s response to its thinning third-party library is to spend more on originals, which it’s gambling will keep subscribers from jumping ship,” He went on to add, “But with half or more of its most-viewed shows being owned by three studios, each of which is launching their own DTC services, how long can you convince 55+ million U.S. consumers that your service is worth paying a premium price, especially compared with Hulu (offers an ad-based option), Amazon Prime Video (free with Prime), and Disney+ (coming in a $6.99/month)?

    Industry chatter seems to back that up with recent comments from NBC Universal and Hulu executives expressing their surprise that Netflix was so reluctant to go down a route they both felt benefited their own services and customers.

    With a huge production budget approaching $15 billion to cover large scale plans for original programming, including long term use of use of the UK’s Shepperton Studios, and all the while operating in debt, the streaming giant will no doubt be wanting to explore numerous avenues for raising revenue. Could an ad supported tier be one of those avenues?

    Certainly, Greeson thinks so, as he expects the streamer to launch a less-expensive ad-supported tier within 18 months, despite Netflix’s contention that advertising is ‘not in its DNA.’

    Ads will become an important part of a comprehensive tiering strategy that helps bullet-proof Netflix for years to come,” he concludes.

    How many AVForums Netflix subscribers would be happy with a lower price tier that introduced ads? What if that helped fund a second subscription, say to the new Disney+ or Apple TV Plus services? Let us know in the discussion thread.

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