If Netflix began showing ads on its platform, viewers would revolt.
It’s safe to say that viewers would band together and storm the Netflix headquarters before they allowed that to happen. So how likely is it for Netflix to make this monumental change? Here’s what we know.
Netflix could lose a quarter of its membership by running ads
When viewers are unhappy with a streaming service, the most effective way to fight back is to hit them where it hurts- in the wallet, by canceling their membership. A new study by Hub Entertainment Research found that if Netflix was to start running ads on their platform, they could lose up to a quarter of their membership.
Twenty-three percent of respondents said they would definitely or probably cancel their membership if Netflix ran ads while keeping the same membership fee. That number would translate to nearly 14 million subscribers.
Survey respondents were between the age of 16 and 74, watch at least an hour of television a week, and have broadband in the home. It included 1,765 U.S. TV consumers.
If Netflix were to lower its membership fee, there was a substantial difference in the opinion of respondents. By lowering the fee by $2, the percentage of viewers that would cancel dropped to only 14 percent. By lowering it by $3, only 12 percent would cancel.
Consumers are expecting some type of reimbursement for their time spent watching advertisements, and it’s not an unfair request.
Will Netflix run ads on its platform?
Netflix is aware that its viewers resist the push for advertisements. Right now, they’re doing everything they can to avoid the necessity of ads. In January, they raised prices to support their growing income needs, but that option may not last forever.
There’s only so much consumers are willing to pay for a streaming service, and Netflix’s growing list of original shows means it’s eating up its income fast.
Producing original content is a great way for Netflix to bring in new subscribers, but those shows can have a very large price-tag. The popular prison drama, Orange Is the New Black, brings in plenty of new viewers, but it costs $50 million per season to produce.
House of Cards takes $60 million for each season, and The Crown is a whopping $130 million a season. Even with Netflix’s 139 million subscribers, bankrolling the number of shows they have is a delicate balance, and eventually, they may have to depend on ads.
Advertising experts say Netflix may not have a choice
Although Netflix continues to say that it isn’t planning on adding advertisements, industry experts say it may become a necessity if Netflix wants to grow.
During a panel at IAB’s Digital Content NewFronts, as reported by CNBC, advertising experts were asked about the possibility of Netflix remaining ad-free. “They’re going to need growth,” said Tara Walpert Levy, YouTube and Google’s VP of Agency and Media Solutions. “Eventually, they’re going to need more growth.”
However, despite the survey results, experts thought viewers would be willing to put up with ads for more choices in their programming. “The consumer wants choice and they want something that creates value for them,” JP Morgan Chase CMO Kristin Lemkau said. “To the extent that you’ve got this subscription version versus the non-subscription version, consumers will take that tradeoff.”
At this point, Netflix doesn’t have any plans to start running ads. But they may be forced to try it in the future. We just hope they’re ready for the backlash from consumers that’s sure to happen.