While some longtime viewers and others who have canceled Netflix wretched when they heard of plans to offer an ad-supported tier of Netflix, Steven Cahall an analyst at Wells Fargo thinks the move will pay out big dividends for Netflix in terms of both revenue and customers.
The move may not be everybody’s cup of tea, but Cahall believes that by 2025 Netflix will see a tremendous 6% boost in subscribers bringing it to 227 million. Even more, he thinks the company will see Ad-Supported-Video On-Demand (AVOD) allow the streamer to make as much as $2.9 billion by 2025. It would be a steady but steep increase year in and year out with 889 million in 2023, $1.975 billion in 2024.
If things work out well for the company it may make 2022 look like more of a learning experience than a swoon in the grand scheme of things. Netflix has had its share of learning experiences with the most notable one being the way they announced that the service would no longer offer DVDs by mail for its less expensive pricing tier. To think of an uproar over access to DVDs these days shows just how long ago the move was considered controversial.
Pricing under Cahall’s analysis could be set at $9.99, which seems to be based on the ad-supported version of HBO Max. The question at that price range would be whether customers consider Netflix the kind of prestige content worth also watching commercials for even at a paid tier when compared to other streaming services such as Hulu which only charges $6.99 for it’s ad-supported service which can also be bundled with Disney+ and ESPN+ for $12.99.
Cahall’s analysis is hardly the actual roadmap for Netflix which may choose to structure the pricing and access totally differently. But it is the first forward-thinking look at Netflix that was not couched with doom and gloom based on the first-quarter numbers of 2022.