The insertion of promos for its shows and movies between episodes of current programs is something Netflix is testing — resulting in some criticism from its subscribers.
But, what if Netflix were to show advertisements, rather than promos? And, what if Netflix bumped its subscription rates by at least $5 per month?
Concerns facing many MVPDs may end up vexing Netflix and similar OTT services.
The questions were asked by Hub Entertainment Research in a TV-focused study dubbed “The Future of Monetization.”
The study gauged consumer reaction to alternatives to the Netflix pay model status quo, including possible price increases and an ad-supported plan.
Among the study’s key takeaways:
- If Netflix raised the fee for its current, ad-free service by $5 or more per month, about 1 in 4 would consider dropping their subscription.
- A $2 increase would have just a marginal impact: only 8% say they’d cancel.
- At a $5 boost, a much larger 23% say they’d drop their subscription.
- At $10 more per month, 28% say they’d cancel.
At the same, roughly one-quarter of current Netflix subscribers say they’d drop the service if it began including ads during shows. Under this scenario, 23% say they’d definitely or probably drop the service. Just 41% say they’d definitely or probably keep their subscription, with 37% undecided.
It presents a unique scenario for the entire television industry, with ad-free viewing now expected among those paying for a service expressly designed to distinguish itself from “TV.”
Other variables were asked by Hub of its respondents. If Netflix content included ads, but the subscription fee were $3 less per month, subscribers would be more likely to keep the service—but losses could still be significant.
At $3 less per month, 16% say they’d cancel their Netflix subscription if ads were included. Half say they’d keep their service under this scenario, but just 25% say they’d definitely keep it.
“When we ask subscribers what they consider to be the most attractive features of Netflix, the fact that it’s ad-free consistently ranks toward the top of the list,” said Hub’s Peter Fondulas, a co-author of the study. “For the moment, that remains a key distinguishing characteristic of the service, especially as other OTT providers attempt to compete with high-quality original shows of their own.”
Hub’s Jon Giegengack added, “This data shows the potential downside for ad-free platforms that move to incorporate ads after the fact. Hulu has been growing, even though it both charges for a subscription and shows ads. But, it’s easier to do that from the outset than it is to take away a benefit that people have become used to.”
Hub’s “The Future of Monetization” study was conducted among 1,612 U.S. consumers with broadband who watch at least one hour of TV per week. The data was collected in August.
