Netflix seems confident that it can grow without introducing advertisements. The streaming giant’s CFO Spencer Neumann has confirmed there won’t be any ad-supported or ad-subsidized subscription packages. He, however, didn't confirm that Netflix won't take that route ever.
After Disney confirmed it would offer an ad-supported subscription tier to its Disney+ streaming service, it appeared Netflix too might follow. A subscription tier with ads usually costs less but subscribers have to bear advertisements, despite paying for a service. While ads lower the price point, they often cause disruption in the viewing experience. Such tactics might work in the short term, but could be detrimental to Netflix, hinted Neumann.
Netflix is focused on optimizing for long-term revenue…and we want to do it in a way that is a great experience for our members. Right now, we think we have a great model and a subscription business that scales globally really well. We were about a $20 billion revenue business two years ago…we’re $30 billion revenue now. The growth is healthy across every region of the world.
Netflix does have a competitive “all-you-can-eat” pricing. Tariffs vary depending on the number of devices and the quality of the streamed content. Instead of offering an ad-supported subscription, Netflix has offered a budget tier in nascent but fast-growing markets such as India.
For just about $2 per month, Netflix subscribers in India have access to the entire catalog, but the streaming quality is restricted to 480p, and access is limited to a single device. Needless to add, tariffs in other regions are quite higher in comparison. Netflix is clearly afraid that ads could negatively impact end-user experience but is obviously concerned about revenue generation.
It’s not in our plans, but other folks are learning from it. So, it’s hard for us to ignore that others are doing it. But, for now, it doesn’t make sense for us.
Neumann was obviously referring to the fact that there are far more streaming services vying for subscribers. Apart from Hulu and Amazon Prime Video, broadcasting giants as well as production houses such as HBO, Paramount NBC, Peacock, and so on, are active in the streaming service market.
It is amply clear that Netflix hasn’t completely rejected the idea of inserting ads to lower the entry price point for new members. But it is trying other routes to increase its revenue. Apart from streaming, Netflix is actively exploring the gaming business. Although the streaming giant’s early offerings seem rudimentary, Netflix is obviously attempting to grow in the space.