Netflix built a TV empire without ads. Here’s why it’s time to consider them

Netflix built a TV empire without ads. Here’s why it’s time to consider them

I hate ads. 

The smug couple in the diamond commercial. The quippy insurance guy trying to convince us his company cares. Even the fun ones like Geico’s rotating carnival of mascots wear on me quickly after the fifth, sixth, or twelfth time they’re shoved in my face. 

Like a lot of people, it was the ads (along with the ballooning prices), that chased me off cable. And I count ponying up for the premium versions of streaming services like Spotify and Hulu among the most worthwhile purchases I make every month. As I get older, I’ve even bailed from the constant interruptions of rock radio to the public jazz station. 

Not everyone is as deeply affected by the repetition and mediocrity of advertising as I am, though. In fact, a new study from TDG research shows a significant percentage of Netflix subscribers (17 percent, or around 10 million users) would at least consider the unholiest of betrayals in the streaming world: An ad-based Netflix subscription. 

And you know what? It’s actually a great idea. No, really. Hear me out.

The great (streaming) war

I’m not saying Netflix should open the floodgates and totally sully its serene sanctum with cereal ads and soft-lens close-ups of elderly couples bathing in the woods. But when the coming streaming wars break out in earnest, a cheaper, ad-based Netflix option — alongside the pricier ad-free choices — may be a great option for a lot of people.

Sure, there’s been no shortage of healthy competition up to now from on-demand services like HBO Now, Hulu, and Amazon, but it’s nothing like what we’re about to see. 

You’ve likely heard of Disney+, the streaming upstart that drops this fall with the vast majority of Disney’s record-breaking properties (Star Wars, Marvel, Pixar, etc.) and brand new shows starring some of its big-screen stars. But perhaps you haven’t heard the starting price: $7 per month. That fee includes 4K HDR streaming, an impressive-looking interface, and hundreds of hours of compelling movies and TV shows, and still beats Netflix’s Standard Definition tier by $2 per month. Meanwhile, Netflix’s hot-shot version with 4K, HDR, and (highly limited) Dolby Atmos audio costs more than twice that price.

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Consider that $7 an opening bid. There’s virtually no way the price stays that low for long, not without Disney taking major losses. But it’s enough to make just about any tangential Disney fan ask where to sign, and it could cut hard into Netflix subs in the near term.

And Disney+ is just the beginning. 

We just learned the name of WarnerMedia’s new streamer, HBO Max, and really, the name says it all. It’s true that parent company AT&T has created multiple streaming services before and failed miserably. But if HBO Max comes in with HBO programming and a slew of Warner’s other properties (including Friends) at the price being tossed around — about $16-17 per month — it’ll be hard to say no. 

Most serious TV fans already shell out $15 monthly for HBO’s streaming service or cable add-on — at least when Game of Thrones (may it rest in poorly-resolved peace) or the next big series starts up. If you could get a variety of DC films and TV shows, Harry Potter’s “Wizarding World,” CW fare, Turner shows (from the likes of CNN, TBS, TNT, etc.) or other Warner Bros. properties thrown in for $2 more per month, would you really say no?

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To a lesser extent, there’s also Apple TV+, which may not have Disney or HBO’s cache, but has some serious stars, including Steve Carell, Jennifer Aniston, Reese Witherspoon, and even Oprah, many of whom were dragged out on stage for Apple’s “Showtime” Event.

Then there’s the aforementioned Amazon and Hulu (which will be getting other major properties from Disney), as well as Showtime, Starz, Cinemax, CBS All Access, etc., etc., etc. Even NBCU has an ad-based streamer coming for $10-per-month (or free with cable) which will eventually host The Office. 

All of these services are looking to make their own splash, and one by one, they’re pulling some of their best content from big red and striking serious bargains in a play to get your money. May I remind you, you only have so much of that stuff? If you want to sample the widest array of programming, compromises will need to be made.

Surviving the tide

For Netflix’s part, while the streamer isn’t going anywhere anytime soon, its revenue structure is based around spending gobs of money on content creation and acquisition (as much as $15 billion per year) and expanding globally, all in an effort to acquire new subscribers. Netflix needs to grow to survive. The service already boasted 139 million subs at last count, aiming for 200 million in 2020. The good news is, its biggest competition will come from within the U.S. borders for starters, letting it scoop up overseas subscribers. But Disney and Apple are both primed to go global thanks to universal brand appeal, and they won’t be alone. 

Netflix has successfully reinvented itself several times over since the early days. The company moved from a DVD rental service to a streamer; from domestic streamer to global powerhouse; from a purveyor of second-run series and movies to one of the largest and most prolific content creators on earth. In other words, anything we can think of or predict, Netflix CEO Reed Hastings and his team of prognosticators have already considered it. After all, you can only raise prices so high in this new market, and insiders have long been predicting an ad-based tier. I reached out to Netflix to see if that’s something they’re considering, but they’ve been notoriously tight-lipped about any major changes to their subscriptions.

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It’s the company’s obvious next move. It would offer a large amount of revenue, sure, but it could also allow for faster growth from a more cautious consumer pool at a time when there have never been more choices. For Netflix, at least in the short term, an ad-based add-on is a safe way to survive the onslaught of competitors staring it dead in the face. 

Once the dust clears, it won’t take long for the competition to raise prices, creating a more even field — there just isn’t enough money in subscriptions to keep them so low. Only time will tell which will live, which will die, which will add commercials, and which will conglomerate into something that looks more like an online version of the cable/satellite subscriptions of old. 

In the meantime, while streaming may be a buyer’s market for some time, most of us can’t afford to choose them all. And a cheaper Netflix tier could be a great way to spread the wealth, so to speak.

In fact, come to think of it, maybe ads aren’t so terrible after all.

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Published at Thu, 11 Jul 2019 19:18:41 +0000

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