July 11, 2019
With Netflix set to release financial results on July 17, two new research reports suggest the SVOD behemoth’s subscribers would consider ad-supported content instead of paying higher monthly fees.
While Netflix doesn’t stream advertising and has made no suggestion it plans to, industry scuttlebutt contends the No. 1 SVOD service might have to consider the option to offset burgeoning content costs and debt.
Recent comments from NBC Universal and Hulu executives have rekindled speculation as to whether Netflix will introduce an ad-based tier. Hulu has always offered a less-expensive ad-supported option, while NBC Universal’s pending streaming service will be both ad-supported and subscription based.
According to new TDG Research, a third of Netflix users would consider changing tiers, more than half of which are moderately likely to or definitely would switch.
While Netflix has consistently spurned ads, the decision is not entirely within its control, according to Michael Greeson, president of TDG and SVP of Screen Engine/ASI.
Indeed, with two of Netflix’s most-streamed programs — “Friends” and “The Office” — set to leave the platform after 2020, the SVOD service in under increasing pressure to spend on original content to fill the void.
“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,” Greeson said in a statement. “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)?”
TDG contends Netflix will need to increase the subscription fees (which it recently did), or create a new revenue stream, such as advertising.
“This should not be an either/or decision, but that’s what it is,” Greeson said.
A separate survey of 1,000 Netflix subs by KilltheCableBill.com found more than 24% of respondents thought their plan was too expensive.
TDG’s research from late 2018 found that Netflix’s most recent price increase strained the limit of the service’s value, even before popular third-party shows are pulled from the lineup.
The research firm contends Netflix could “bullet-proof” its future with the introduction of a less-expensive ad-supported pricing plan.
“The stage is shifting,” Greeson said, “and if, like Blockbuster [Video], Netflix fails to evolve in a timely fashion, the company may see its domestic fortunes reversed.”