In this article:
- As a result of slowing subscriber numbers, Netflix is thinking about adding an ad-supported tier.
- The streamer has maintained throughout the years that it would not introduce ads.
- This move could open up a big opportunity to advertisers.
Netflix is changing the channel when it comes to advertising.
The streaming service said last week that for the first time, it will consider offering a subscription option with ads. Netflix is reportedly exploring that option because of less than optimal subscriber numbers in the first quarter of 2022, losing members for the first time in more than a decade. An ad-supported tier would be a drastic change for Netflix, which has long avoided hosting ads on the platform. But for advertisers, the news is more than welcome.
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The move to streaming from cable television has forced advertisers to shift their spending to other forms of media. The number of households “cutting the cord” or ditching cable has increased to 35.3 million in 2021, up from 24.6 million in 2019. Meanwhile, revenue from digital video advertising is on the rise. Advertisers brought in $39.5 billion from digital video ads in 2021, a more than 50% jump from 2020.
Netflix has been a big holdout when it comes to advertising. “We want to be the safe respite where you can explore, get stimulated, have fun, enjoy, relax — and have none of the controversy around exploiting users with advertising,” said Netflix’s co-founder and co-CEO Reed Hastings in 2020. But in response to the latest earnings report, Hastings changed his tune, saying: “Allowing consumers who would like to have a lower price and are advertising tolerant get what they want makes a lot of sense.”
Despite slumping numbers, Netflix is still the king when it comes to streaming. Netflix rounded out 2021 with 221.8 million subscribers globally, beating out competitors like Disney+, Amazon, and Hulu. Disney+ also announced recently that it will begin offering an ad-supported subscription tier.
Netflix’s decision to incorporate ads to its programming will open up a big audience for advertisers, and likely for top dollar. Still, the streamer isn’t expected to add the new tier until 2024. Before it rolls out ads, Netflix will likely also need to make up ground in terms of advertising infrastructure, an area where streamers have already spent time and money developing.