By the end of this year, there’s a good chance some percentage of the tens of millions of people with a Netflix account might start seeing ads on the streaming service for the first time.
The acknowledgment from Netflix’s leadership a few weeks ago that the company has finally decided to back off one of its sacrosanct pillars — no ads on the platform — landed like a bombshell on Wall Street. Not only that, but in tandem with a huge subscriber loss and the announcement of a crackdown on password-sharing, all in service of improving the company’s revenue picture, Netflix said the first ads might start showing up soon. As in, later this year.
And while the company hasn’t detailed any concrete plans yet along those lines, the investment analyst community has started positing some ideas that could give an idea of how Netflix’s plans here might shake out.
Is Netflix going to bring ads?
As a reminder, Netflix has confirmed it will launch an ad-supported tier, in response to business conditions that have also forced it to make some other course corrections and reversals of previously established practices.
Like, for example, the way the company before now generally let moochers slide when they borrowed the login credentials for someone else’s account. If that includes you, though, be warned — those days are coming to an end.
Netflix is keeping its plans along these lines, understandably, close to the vest for now. Here, though, insights from the analyst community can be instructive. Analysts, for one thing, have access to company executives. And they bring institutional knowledge to bear from covering the industry as a whole.
A new report about all this from media analysts at Wells Fargo offers some likely scenarios for how ads might soon be part of a Netflix account. “One of the main decisions Netflix needs to address over the next few months is figuring out the ad load — the number of minutes of ads per hour — along with where to insert the ad breaks,” the Wells Fargo note explains.
Analyst: Up to 6 ads per hour on a Netflix account
The Wells Fargo note goes on to point out that the most straightforward way to insert those ads into content is to pack them at the front. That would force the user (who, again, has paid for the ad-supported Netflix account tier — these ads aren’t coming to everyone) to watch a certain amount before their content begins, similar to the ad experience you get in a cinema.
Obviously, Netflix will want to maximize the number of front-loaded ads here. While, at the same time, not offering so many that it annoys users. Easier said than done to hit that perfect spot, right?
The Wells Fargo analysts, for their part, think that up to five or six short ads might be feasible. Or, even likelier, something like four ads with a runtime of 15-30 seconds each for every 60 minutes of content.
These analysts also assume there’s no way that Netflix would interrupt its content to make users watch ads. Inserting ads smack in the middle of Netflix TV shows and movies presents “a bigger technical challenge to determine when is appropriate in all those millions of hours of content.”
One more big question
Meanwhile, here’s something else relevant to think about:
Is there any digital service of any kind right now with advertising that you enjoy? Most of us, at best, tolerate ads, don’t we?
Netflix isn’t doing this, offering an ad-supported Netflix account tier soon, because it wants to. The company is doing so because business conditions more or less now require it. Already, Netflix has estimated that the quarterly period ending this month will see the company lose another 2 million subscribers.
But the interesting number, to me, is 101 million. That’s how many users Wells Fargo thinks Netflix will be able to bring on to the ad-supported Netflix account tier. That’s also just over one-third of the total 272 million Netflix global subscribers predicted by the end of 2025.
However, there are some pretty huge assumptions baked into that forecast. Not the least of which involves Netflix absolutely nailing this new and supremely complicated thing that it’s never tried before.
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