During the latest Netflix earnings call, Reed Hastings said something that could shake the industry.
“Think of us as quite open to offering even lower prices with advertising as a consumer choice,” Hastings said.
That’s right. Netflix is talking about offering an ad-supported service after years of being available exclusively as an ad-free streamer. The odd thing is that Netflix, which really invented the idea of streaming a large catalog of movies and TV shows when it added streaming to its then-popular DVD rental business, is late to the party. Competitor Hulu actually began as a totally free service supported by advertising before transitioning to a paid service when it began to be available on streaming devices like Roku and Apple TV under the now dropped monicker of Hulu Plus. Yeah you can thank Hulu for all the (Plus) services.
Hulu’s ad-supported service is more popular than its more expensive ad-free tier, probably because its viewers got used to a certain price point and accepted what came with it. HBO Max also beat Netflix to the game by releasing an ad-supported version of the service that now mirrors the content found on its ad-free offering for a substantial discount.
There are some viewers who reject watching advertisements and are happy to pay more to avoid them, but cost-conscious consumers appreciate the choice and may way such factors when looking to shave costs for TV viewing as multiple streaming services hit the scene. While Hollywood types may not see 10 dollars for this, $14.00 for that, $6.99 as major financial sacrifices they begin to add up like any other bills and when people are fighting through inflation, or cutting back to save for upcoming expenses something has to give and its a lot easier to drop a TV service than it is a car payment. And even though they are hardly equal there is a psychological and tangible benefit to cutting even small costs.
So, as Netflix begins to enter a new chapter in a now highly competitive streaming landscape, maybe having an ad-supported tier will prevent the service from having to increase the price of its subscriptions which is always a bad look.