Netflix has officially gone on record as clearly stating that it has absolutely no plans to add advertising to its programming now or in the foreseeable future. Although rumors generally pop up from time to time about Netflix adding advertising to its content, these rumors continue to prove themselves untrue.
Many Netflix subscribers would tout ad-free programming as one of the key benefits of subscribing to the service. Although the company could make a killing with ad revenue, a recent study shows that it would also likely lose over 57 percent of its subscribers by adding commercials to its plans. So far, keeping the service commercial-free has paid off for Netflix. And this is even more important after it recently raised prices on its standard streaming plans, resulting in its most significant price increase since the company began offering streaming services in 2010.
To date, Netflix has not directly addressed the rumors that it would eventually add advertising to its content. However, according to Variety, the company made an official statement about the issue when announcing its second-quarter 2019 earnings. This statement makes it clear that Netflix has no intention of adding commercials to its service, either now or in the future. In a letter to investors, the company wrote:
“We, like HBO, are advertising free. That remains a deep part of our brand proposition; when you read speculation that we are moving into selling advertising, be confident that this is false. We believe we will have a more valuable business in the long term by staying out of competing for ad revenue and instead entirely focusing on competing for viewer satisfaction.”
In comparison, Netflix competitor Hulu relies on advertising to fuel its service, which generated $1.4 billion from ad revenue in 2018. That's because almost 70 percent of Hulu subscribers choose its cheaper ad-supported streaming version of the service. Hulu even has plans to expand advertising on its site, by adding non-intrusive transparent advertising images to content when subscribers pause a video. In comparison, the upcoming Disney+, which will probably be the biggest competitor to Netflix in the streaming market, will not include advertising with its content. Other services, such as Amazon Prime, also remain ad-free.
If anything, Netflix knows its subscribers and understands that they expect a more premium service without ads, similar to what HBO offers. Although Netflix continues to focus on expanding its original content, it accepts that it needs to pay for that content through subscriptions, rather than inserting commercials into programming. Subscriptions are currently in decline at Netflix, and the service is suffering the loss of older series due to new streaming services. However, the company has plans to continue to monetize itself without the necessity of ad revenue. Although Netflix could potentially generate $1 billion by offering an ad-supported plan, keeping customers happy by remaining ad-free is more important.
Source: Variety