Research: Ads could cost Netflix subs

Netflix recently confirmed that it has begun testing the idea of inserting promos for its shows and movies between episodes of current programmes.

In its most recent TV study, The Future of Monetization, Hub Entertainment Research gauged consumer reaction to alternatives to the Netflix pay model status quo, including possible price increases and an ad-supported plan.

Highlights from the study:

1) If Netflix raised the fee for its current, ad-free service by $5 (€4.31) or more per month, about one in four would consider dropping their subscription.

• A $2 increase would have just a marginal impact: only 8 per cent say they’d cancel.
• At a $5 boost, a much larger 23 per cent say they’d drop their subscription.
• And at $10 more per month, 28 per cent say they’d cancel.

2) About a quarter of current Netflix subscribers also say they’d drop the service if it began including ads during shows.

• Under this scenario, 23 per cent say they’d definitely or probably drop the service.
• Just 41 per cent say they’d definitely or probably keep their subscription, with 37 per cent undecided.

3) 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 per cent say they’d cancel their Netflix subscription if ads were included.
• 50 per cent say they’d keep their service under this scenario, but just 25 per cent 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 Peter Fondulas, principal at Hub and 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.”

“This data shows the potential downside for ad-free platforms that move to incorporate ads after the fact,” said Jon Giegengack, principal at Hub Entertainment Research.  “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.”