Netflix May Have To Start Putting Ads On Their Content, Disappoints Millions Of Subscribers
Netflix is one of the few streaming services that offers its subscribers an advertisement-free experience. After years of not needing to resort to advertising to offset the costs that come with creating original content, the company is considering rolling out ads as production costs rise, reports The Daily Mail.
The streaming giant has an original content budget for producing shows, including Orange Is the New Black and Stranger Things, which has continuously grown as the company adds more original shows and movies to the platform. Recent reports reveal that Netflix spent just over $12 billion on original content productions in 2018.
The increasing costs have required the company to rethink the no-advertising policy, executives from NBC and Hulu said at a Cannes Lions panel. Chairman of advertising sales and client partnerships at NBCUniversal Linda Yaccarino detailed the issue that Netflix is facing.
“When you have to make more programming that’s not guaranteed to be a hit, you have to spend more money, you have to build your brand, you have to help the consumer discover your stuff. The price will go up for the subscription, and it would be logical to mitigate those increases to take ads.”
Netflix may soon begin showing advertisements alongside their content to their 150 million subscribers#Netflix #Streaming #Adverts #Advertisement https://t.co/oWnRstifrL
— Giraffe Insights (@GiraffeInsights) June 20, 2019
Consumer studies compiled into a report by DecisionData found that most people prefer to pay more for an ad-free experience than to pay less and be forced to sit through ads. The report showed that an overwhelmingly 74 percent of respondents would rather pay more than watch ads while just 18 percent preferred watching ads over paying a higher subscription rate.
In fact, Netflix has gotten away with avoiding advertisements on its content by hiking subscription prices over the years. The most recent price change, which occurred in October 2017, showed a nearly 10 percent increase.
The highest-priced plan, which included being able to watch Netflix shows and movies simultaneously on the same account on four different devices, went up to $14 a month from $12. A plan that allowed users to watch content on two devices at the same time rose from $10 to $11 while the most basic plan, which allows users to watch shows and movies on just one device, was the only one that did not increase in price, remaining at $8 per month.
Streaming rivals such as Amazon Prime Video and Hulu have not backed away from advertisements, with Hulu’s head of sales Peter Naylor commenting on the future potential of the ad experience.
“The future of ad-supported media does not resemble what we’re doing today in terms of ad load or even ad shape. It can be interactive advertising or non-intrusive advertising…When everything’s on demand and served through an IP address, the ad experience is going to dramatically improve.”
