Netflix, like many other streaming services, may have to bite the bullet and provide an ad-supported plan option. This is why.
The throne that Netflix has sat on for over a decade is beginning to tremble and crumble as subscribers cancel their subscriptions. As more people abandon Netflix in favour of other, more economical streaming services, it appears that an ad-supported plan may be just what the firm needs to maintain its dominance.
While Netflix has avoided the ad-supported business model, other streaming platforms have fully embraced it, understanding that it is an excellent method for people to become acquainted with their service at a more affordable price. As a result, Netflix obliges to comply sooner rather than later.
Netflix admits that an ad-supported plan is possible
During Netflix’s Earnings Interview for the First Quarter of 2022, CEO Reed Hastings stated that the firm is now open to introducing a new, lower-priced tier that includes advertisements.
According to Cord Cutters News, Hastings stated:
Those who have followed Netflix know that I am opposed to the complexity of advertising and a great fan of subscription simplicity. But, as much as I support that, I am a stronger supporter of consumer choice, and allowing consumers who want a cheaper price and are tolerant of advertising to obtain what they want makes a lot of sense.
Netflix previously stated that the company had no plans to introduce an ad-supported tier. In actuality, Netflix CFO Spencer Neumann stated in March 2022 that the company believed it had an excellent financial model and that ad subsidisation was not in the company’s plans.
Why Does Netflix Require an Ad-Supported Plan?
Netflix has reached a point where developing an ad-supported strategy is more than merely following a “trend” among streaming services. It’s more of a requirement at this point. Here are some of the possible explanations.
1. An ad-supported plan could assist Netflix in regaining some subscribers.
Netflix had no good news to announce for the first quarter of 2022. With the company’s subscription numbers decreasing by 200,000 in the first three months of the year and no signs of improvement on the horizon, it appears that Netflix’s decision to abandon ad-supported plans was essential.
Netflix is losing subscribers as a result of the company’s decision to withdraw its service from Russia following the outbreak of the Ukrainian war. However, a bigger proportion of consumers left because Netflix raised its subscription costs in the United States, Canada, and other countries. Many fans believe the service is no longer worth the asked price, but a lower-cost package may entice some of those who have departed to return.
2. It Might Persuade Password-Sharers to Buy a Subscription
Netflix has also reached a sort of market cap, with the number of people willing to subscribe reducing by the day. According to estimates, 100 million households are utilising a Netflix account that someone else is paying for, which is becoming a dilemma for the firm. With slightly more than 222 million customers globally, Netflix is losing over a hundred million accounts, which has a significant impact on the company’s bottom line.
Again, that ad-supported strategy may persuade at least some of these people to open their own accounts.
3. Netflix Might Be More Competitive
While Netflix competes with other streaming services, the competition offers reduced pricing and ad-supported options for even lower expenses. HBO Max, Hulu, Discovery+, and Peacock are a few examples of services that provide both ad-supported and ad-free versions.
As a result of the lack of blockbusters, beloved network TV shows, and another programming that its consumers enjoy. Netflix has been compelled to produce its own shows and movies. While some titles are fantastic, the majority of original content is at best mediocre.
Having the opportunity to pay less, even with the disadvantage of having to watch advertisements, may persuade some of those who have moved on to other services to return. After all, while some former Netflix subscribers may not believe that watching all those original episodes and movies is worth $20 per month, a lower price, such as $5 to $7/month. May be closer to what they’d be prepared to pay.
Why has Netflix stayed away from the ad-supported plan thus far?
Netflix has surged in popularity over the last decade, becoming the one service that everyone thinks of when considering streaming content.
Until now, the firm assumed it was untouchable. The reality is that the industry has become more competitive. And people’s streaming budgets are being stretched to the limit due to the abundance of options. While Netflix has avoided ad-supported plans thus far, the firm must change if it is to thrive.