Analyst Asserts Netflix Needs Ad Option, Especially In International Markets

As Netflix continues to seek growth in international markets -- especially in countries where competitive consumer entertainment pricing is very low -- one key way to help it make subscriber gains would be with an advertising option, according to one industry analyst.

“We do not think Netflix will achieve U.S.-type levels of penetration in APAC [Asia-Pacific region] while charging a premium to pay TV," says Michael Nathanson, senior research analyst of MoffettNathanson Research.

“But naturally introducing advertising could help drive faster total company revenue growth.”

For example, Nathanson says, in India, the average pay TV bundle price tag is around $4.20 per month. But the price for Netflix is higher -- $6.49 per month for standard Netflix per month and $8.44 for premium Netflix. By way of comparison, Disney+'s Hotstar premium option is priced at $1.64 a month.

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Nathanson says there are also other markets that need an option for advertising.

“We have long argued that Netflix will need to add an advertising tier to compete in the lower RPU [revenue per user], mobile-dominated markets of APAC, Africa and LATAM [Latin American territories].”

Netflix has mobile-only plans in 82 markets across APAC and Africa -- priced at $3.99/month in most markets, including as low as $1.43/ month in Pakistan and $1.94/month in India.

These plans are limited, offering one, single standard-definition TV stream, which means it cannot be shared with someone else in a household.

Netflix executives have dismissed the idea of adding an advertising option to any part of its subscription video-on-demand service.

1 comment about "Analyst Asserts Netflix Needs Ad Option, Especially In International Markets".
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  1. Jim Meskauskas from Media Darwin, Inc., March 16, 2022 at 2:14 p.m.

    Netflix will eventually have to introduce something similar to the US market as well.  There are only so many subscribers they will be able to maintain at the $10 or more levels.  The demand for in-stream inventory is high, and supply is limited.  Even if they entered the market with an ad-supported option, the amount of available inventory won't match demand, translating into premium pricing for even the most pedestrian content.

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