Is staying commercial Free the best option for Netflix?
Under pressure concerning the use of promotional messages for Netflix original programing Reed hastings clarified that the movie and TV streaming network will not in fact begin to run third party advertisements. With outrage already building, as is usual for Netflix customers, concerning the trailers for Netflix shows before and after some features people were beginning to speculate that Netflix could one day insert commercials for consumer goods like Hulu and many other streaming services.
Is this the right approach?
Netflix is very sensitive to customer feelings. Being reactive to your base shows a great deal of understanding for the consumer but I have to wonder if the company may be better off in the long run by offering a commercially supported version of the service along side an ad free version. Here
is why. For all of Netflix’s presence, which included well over 50 million paying customers and who knows how many password sharing viewers, the company has mounting costs surrounding the production of original material. Netflix views itself as a streaming Network and for good reason. There are more Netflix original series popping out this season than on many traditional television outlets be they cable or broadcast channels and original feature films are on the way. If Netflix is going to increase its capacity for original programming as well as continue to maintain its backlog of past TV Shows and movies it will need more capital going forward.
Offer Different Plans
At the risk of people saying its just like cable Netflix should begin to offer different plans. The company would be wise to consider a tier that includes limited commercials at its standard price along with a commercial free version for no more than a dollar more per month. If the company can use the extra money from the commercials and people choosing another tier to substantially increase its catalogue, sign more exclusive deals etc it would likely gain more customers than it loses.
Why do people hate Ads?
Maybe I am in the minority but commercials don’t bother me. Yes people argue regularly that if they pay for a service they should not have to see commercials. Yet they pay a fee to watch every single cable and satellite channel. People pay companies like Tivo and Tablo just for the right to watch the shows that they have already paid to access at a later period. People pay cable companies monthly for the right to keep a set top box in their homes even though over a few years they will have paid for the set top box ten times over. Commercials on the other hand are transparent ways to fund television programming and have been the method of funding broadcasting over the air since the beginning of the popular medium. Hulu already has a commercially supported structure that also charges and it is growing quickly through new subscribers and deals with pay TV providers. With just over 9 million subscribers it trails Netflix substantially but having already established a model of payment with commercials its customers can not feel ill used. If it were to offer a more expensive ad free option it could have its cake and eat it too. Netflix may have backed itself in to a corner that will have to fight out of one day.