Years ago, when Netflix first burst onto our screens, the streaming service was sold to audiences as a place where you could find all the content you wanted, at the touch of a button, ad-free. Though it looks as though this business model is in for a drastic change with experts warning that the firm may need to start running ads to stay competitive as its subscriber base slows growing.
Having always been adamant that they would never force advertising onto their subscribers, Netflix CEO Reed Hastings saying in 2020, “We’ve got a much simpler business model, which is just focused on streaming and customer pleasure.”There’s much more growth in the consumer market than there is in advertising, which is pretty flat”.
Though with growing financial pressures and an ambition to rise to the very top of film and television production, analyst Michael Nathanson of MoffettNathanson Research, stated: “Although Netflix management continues to strongly dismiss the idea of advertising, we think that view will be seen as a strategic mistake if future rates of subscriber growth start to fall short of Street expectations,”.
Continuing Nathanson said, “Although Netflix management continues to strongly dismiss the idea of advertising, we think that view will be seen as a strategic mistake if future rates of subscriber growth start to fall short of Street expectations”.
Alongside the potential of showing advertisements, Nathanson also mentioned that Netflix may have to expand its range of exclusive content, including live sports events, stating, “Netflix may want to add sports to a more premium tier, helping to boost ARPU, gain exposure to in game advertising and broaden the appeal of its service in an increasingly competitive market”.
Netflix, however, remains ad-free with no official word to move towards a model which incorporates advertising, though, with slowing subscriber rates, the financial pressures may force such a change in the near future.