In a recent interview, outgoing WarnerMedia CEO Jason Kilar predicted that Netflix would start running ads within the next three years.
“I suspect the religion [Netflix] currently has about not having ads will change in time because offering consumers lower price is a really good strategy,” Kilar said.
Now, with Netflix’s subscriber growth slowing, Netflix is expanding by moving into gaming -- and, possibly, allowing advertising. As Ben Thompson recently pointed out in Stratechery, adding an ad-supported tier would expand Netflix’s subscriber base and allow Netflix to raise prices. Ideally, Netflix could offer an entry-level tier with ads and a premium, ad-free tier below that.
Viewers could then consider whether they wanted to pay an extra $10 a month to never see ads, or save the money and interrupt “Bridgerton” with ads. As proof that an ad-supported Netflix tier could work, look at Hulu, which makes more per subscriber on its ad-supported tier. Three out of five new Hulu subscribers go for ad-supported viewing, according to Ad Exchanger.
Kilar sees it as “inevitable” that Netflix will introduce ads, because there’s no other way to get to a billion users. (Netflix currently has 209 million users, worldwide.)
On the other hand, Netflix currently has 34% of streaming minutes, per Nielsen. Netflix used to have the streaming space to itself, but now vies with Disney Plus, Amazon Prime, Hulu and Peacock Premium, among others.
Personally, if given the choice of paying, say, $25 a month for an ad-free version of Netflix or paying just $10 for a version with ads, I would consider the latter, if there was restraint, like maybe a maximum of two 30-second ads every 15 minutes. If the advertising was targeted and followed my preferences (no shouting, a cutoff at 30 seconds), then I might be inclined to do so. If not, there are other options out there.