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Will Netflix eventually run ads?

Facing strong competition from Comcast, Warner Bros and Disney streaming services, Netflix has spent more than US$13 billion to finance the production of original and licensed content in 2018. And with the price hike in April, the industry is anticipating that Netflix will start ad-supported VoD model.

Joshua Lowcock, EVP and CDO of media agency UM Worldwide, said during a panel discussion at IAB Digital Content NewFronts: “If you look at their content costs … that’s where addressable advertising and new ad formats will come in.”

However, Netflix subscribers are not thrilled about ads.

A research conducted by Hub Entertainment Research shows that 23% of existing Netflix subscribers will most likely unsubscribe from the service if ads were inserted while paying the current subscription fees. Results also show 41% of the respondents would likely continue with the subscription, and the rest undecided.

The research also suggests that Netflix would receive more positive market reactions if they lower the subscription fees by $2 or $3 a month while inserting ads. If Netflix chose to offer the service at $2 lesser each month, 53% of the respondent would choose to continue the subscription, and 14% would drop the service.

OTT market is becoming increasingly competitive as it is deemed to be a zero-sum game; thus, OTT providers have to calibrate carefully their subscription rates if they aim to grow their base.

Although Netflix did not respond to the market speculations, being ad-free remains a strong philosophy and part of its brand proposition. According to a statement released by Netflix: “We don’t offer pay-per-view or free ad-supported content. Those are fine business models that other firms do well. We are about flat-fee unlimited viewing commercial-free.”

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