Basic With Ads
After months of hiring ad executives and securing big name advertisers, the long-awaited ad-supported version of Netflix (NFLX) is finally here. This means that more price-conscious consumers have the option to stream Netflix content for just $6.99 — as long as they don’t mind that 6%-8% of it will be ads.
While this new tier will not include every title available on the platform, reportedly it will include content that represents 85% to 90% of its viewing. The streaming giant didn’t specify the exact percentage of its library that will be available.
The decision to show ads represents a trend across the industry as streamers push to increase average revenue per user. Previously, analysts valued Netflix purely off its subscriber growth, as if it were a social media platform. After half a year of subscriber loss, the company is now looking to capitalize on recent growth, by finding more ways to profit from its subscriber base.
Dollars and Cents
For companies looking to advertise, Netflix will charge between $45 and $65 for access to 1,000 viewers. However, it’s worth noting, some advertisers may be unwilling to pay top-of-the-range for an unproven ad provider.
Over time, the streaming giant hopes to further build its reputation by growing its ad capabilities. For example, it plans to collect personal data such as birthday, gender, and viewing preferences in an effort to show more targeted ads to viewers. This move could potentially result in higher conversions, returns on investment for advertisers, and premium prices for ad placement on the platform.
The Future of Entertainment
The way we consume entertainment is in a constant state of flux. Over the past few decades, we’ve gone from cable and videos to DVDs and streaming. Now, with Netflix’s latest pivot, it will be interesting to see if streaming/ad hybrids are the next big thing.
To succeed, Netflix still has one major goal to achieve. It needs to encourage people to sign up for its ad-supported tier, all while not cannibalizing its more expensive plans. If people resist signing up, or downgrade from more expensive plans, Netflix could have to pause production and go back to the drawing board.
We’ll find out — on the next episode of “Netflix: Streaming Wars”.
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