Subscription services currently dominate the market due to their binge-watching capabilities with no ads. However, with growing competition in video streaming services, Netflix and Amazon could now reconsider their promise of no advertisements on their service.
Many free video streaming services have popped up and have become increasingly popular. The Roku Channel offers TV shows, movies and many regular cable shows like ABC and NBC. Newer ones like Pluto, with 6 million monthly users, and Xumo, with 3.4 million monthly users, are growing at a high pace for subscribers. Hulu offers a cheaper version of its service that runs ads, which has 25 million subscribers. Which means that maybe people are reconsidering paying to not have ads and opting for the cheaper versions of streaming networks.
“Once you’ve signed up for Netflix and Amazon and Hulu, you’re more than $30 deep,” said Colin Petrie-Norris, CEO of Xumo. “Price-sensitive consumers are seeing [free video streaming services] as viable alternatives or complement to paid services — that’s probably the biggest factor.”
Another factor could be that many TV manufacturers such as Samsung, LG and Vizio are adding the ad-supported apps into their devices instead of people having to purchase separate boxes and plugins for their television sets.
Amazon recently released a plan to launch a free, ad-supported video service for their Fire TV streaming devices. Netflix hasn’t yet given any indication that they plan to consider ad-supported services. However, many industry experts have noted that if Netflix wasn’t to expand to international viewing, it could do this quickly by offering a free ad-supported version.
With the numerous amounts of Netflix produced shows and movies and plans to create more to be 50% original content, Netflix is reportedly in debt more than $20 billion and Disney removed all its films from the service at the end of last year to start their own streaming service. Netflix relies on their subscriber rate increasing, and the company came in at 1.4 million subscribers in the final quarter of last year, which was under what they hoped for. They also increased their subscription cost from $11 to $13. However, they are still way ahead of the game with more than 104 million subscribers currently. It comes down to if people are willing to pay more for Netflix original content and no ads or if they would rather pay less for a different service if Netflix continues to raise their costs.
According to a survey, 23% of Netflix subscribers said they would drop the service if they started running ads.
“When we ask subscribers what they consider to be the most attractive features of Netflix, the fact that it’s ad-free consistently ranks toward the top of the list,” noted Hub Entertainment Research principal Peter Fondulas, who co-authored the study.
Either service could start offering a cheaper ad-supported service or start running ads on their main service at any time, but they will have to consider their brand identity and how consumers will react. On top of that, they will have to factor in the cost of investing in a whole new department for ad revenue and ad sales which could cost a good amount for both companies with the risk of losing subscribers.
