Netflix Ads: Are They Worth It?

It is fairly common knowledge that a significant reason why people are choosing Netflix as their primary content provider is that there are no advertisements. That is wonderful from a consumer standpoint, but have you ever considered how much the streaming service is turning down to maintain its ad-free platform?

A report recently published by the website Extreamist claims that Netflix is losing upwards of two billion dollars annually by not allowing ads, based on calculations with the averages of Netflix watch time, television ad time, and money spent on television ads. Now whether or not the conclusions this article comes to are accurate, it does raise the question of whether Netflix should seriously consider ad spots with their programming.

Netflix is infamous for not releasing data on how well its programming performs, so it is difficult to gauge if advertising would be effective with this service. Also, as stated previously, many people choose Netflix because of the lack of ads. Who knows what would happen to Netflix’s subscriber numbers if ads were introduced.  The report also brought up a survey that was conducted which showed that a majority of the participants would prefer hire monthly fees over ads. All that being said, leadership from Netflix has expressed great interest in expanding its library of original content to becoming half of the total content available. That is not a cheap investment, and Netflix needs to maintain constant vigilance with its finances if it wants to not only be a streaming service, but also a production company. Revenue gained from ads could help fund more original content.

To be fair, nobody from Netflix has stated any intent to introduce ads; the report is completely based on theoretical circumstances. Netflix is not hurting financially by any means, but looking for more ways to increase revenue is a logical move for any business to make. It does appear that Netflix is going to continue its current approach, at least for the time being. I think it would be very interesting to perform a more in-depth analysis of what drives people to choose Netflix, and if either higher fees or ads would drive them away.