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More like Netflix and shill, amiright?
Several media experts believe the streaming service will eventually have to serve up ads during their programming.
“I can’t imagine a world where Netflix will be ad-free forever,” said Joshua Lowcock, the U.S. chief digital and innovation officer of the media agency UM, during a panel at Interactive Ad Bureau’s (IAB) Digital Content NewFronts on Monday. “If you look at their content costs … that’s where addressable advertising and new ad formats will come in.”
While Netflix ended 2018 with 139 million paid subscribers (an increase of 26 percent), their content costs were a whopping $12 billion last year, and could rise to $15 billion this year.
Plus, Apple, Disney and WarnerMedia will have video streaming products introduced soon, although Netflix doesn’t sound too worried about increased competition. As a recent shareholders letter noted: “We don’t anticipate that these new entrants will materially affect our growth because the transition from linear to on demand entertainment is so massive and because of the differing nature of our content offerings.”
Still, Netflix has already raised prices and, conversely, shown a willingness to test different types of monthly plans. Offering an ad-supported plan in exchange for cheaper prices might help the company increase their subscriber base. They could actually look to competitor Hulu, which (besides their regular ad-supported plan) is now rolling out both an option for inserting ads “creatively” during binge watching sessions, as well as “pause ads,” which pop up when a viewer pauses content.
Many experts agree consumers would be willing to accept a trade-off of ads for more subscription options. “The consumer wants choice and they want something that creates value for them,” said JP Morgan Chase CMO Kristin Lemkau at the IAB NewFronts. “To the extent that you’ve got this subscription version versus the non-subscription version, consumers will take that tradeoff.”
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