Saturday, August 06, 2011
Netflix should put ads
Yes, I strongly believe so. Netflix has millions of users who stream movies online everyday. Although it is a paid membership Netflix will probably not face a lot of resistance if it places one ad before every streamed movie, just one. This, on the other hand, could potentially be a serious source of revenue since the ads will deliver millions of impressions per month. It's just like what happens at the movie theater.
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3 comments:
I agree, with one caveat, which is that these advertisements be placed towards the beginning of the streaming, similar to Hulu's free streaming. While my business-minded brain agrees that this would be a huge source of income, there's still that side that wants to be sensitive to the needs of the consumer. I think part of the reason why Netflix and Hulu draw so many consumers is due to the lack of advertising. If advertisers start to flood these channels then they may lose their consumer base.
I am not sure I agree with both of you.
If you refer to blog posts from June 16 and July 25, both referring to the power of Netflix and its recent price increase, one of the benefits of Netflix is the fact that it doesn’t bombard its subscribers with ads. In my post from July 16, I raised the question of whether as more people ditch cable in favor of Netflix, perhaps Netflix would be pressured to start featuring ads. As brands will lose major audience on cable. Following the recent huge jump in subscription prices for Netflix, I do not believe that starting to allowing ads is the best way to go. Many articles, and the blog posts discussed the justification for Netflix’s price jump, however if they will start making revenue from display ads then where is this justification going? Perhaps if ad placement will go hand in hand with a price decrease, consumers would be less annoyed with the change in the way they are used to consume Netflix.
I'm also wary of Netflix opening itself up to ad placement, for a couple of reasons. First, this could create some turf wars between Netflix and the owners of content available on the service; they'd have to determine a way to split the ad revenue. Netflix could argue that it deserves all of the revenue because it provides the service, but content owners could reasonably contend that viewers are only being served an ad because they wanted to see the content.
Second, content owners are looking to Netflix as a way to insulate themselves against the volatility of ad spending. For instance, Viacom's latest quarterly earnings were up due in large part to increased streaming of library content via Netflix. There's a lot of upside potential here and I've got to believe that they'd prefer to keep this revenue stream independent of ad revenues.
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