Netflix Could Lose a Quarter of Its Subscribers If It Ever Starts Running Ads

A new survey shows that most consumers like the streaming service exactly how it is

Netfilx is still king among OTT services, according to a new study. Netflix
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Consumers like Netflix exactly how it is—at the current price and without ads—according to a new survey from media research company Hub Entertainment Research. And if the streaming service would ever start running ads during its programming, it could lose a quarter of its subscribers.

The results of Hub’s survey come a month after Netflix began experimenting with running promos for its other programming between episodes of shows that its subscribers were binge-watching. However, the survey was completed prior to those tests.

For “The Future of Monetization” study, Hub surveyed 1,612 TV consumers from ages 16 to 74 who watch at least an hour of TV per week and have broadband at home.

Netflix subscribers wouldn’t be happy with ads on the service—in fact, almost 25 percent of respondents said they would drop the streaming service if it began running ads during Netflix content, according to the survey. The streaming service now has 130 million subscribers worldwide, 57.4 million of which are in the U.S.

“I think the fact that at least some people would consider dropping Netflix shows that it’s harder to take something away once people have already had it,” said Jon Giegengack, principal at Hub, of the service’s ad-free environment.

Netflix execs have long maintained that they aren’t considering running ads on their platform.

And if Netflix reduced the price of a monthly subscription to $3 a month as part of including ads on the service, 16 percent of those surveyed said they would still cancel their Netflix subscription. Another 50 percent said they would probably stick with the service under the hypothetical scenario, and 25 percent said they definitely would keep it.

“I think there are ways that they could arrange it so they retain as many customers as possible, but I think if they add ads at all, even at price reduction, there will be some people who leave,” Giegengack said. “The question is, do the economics work out for them?”

Hub also examined how high Netflix could raise its monthly fees for its current ad-free offering before it would begin to lose subscribers.

A basic Netflix subscription starts at $7.99 per month. If Netflix were to raise its monthly fee by $2, only 8 percent said they would cancel. If Netflix increased by $5 per month, 23 percent said they would drop the subscription, and if it raised prices by $10 more per month, 28 percent said they would cancel.

Peter Fondulas, principal at Hub and co-author of the study, said Netflix stands out in the crowded steaming space for four main reasons: low price, no ads, vast amount of programming and original shows.

“When the possibility is raised that they could raise their prices, it kind of undercuts that low-price benefit to some degree,” said Fondulas.

The complete “Future of Monetization” study is available here.

@SaraJerde Sara Jerde is publishing editor at Adweek, where she covers traditional and digital publishers’ business models. She also oversees political coverage ahead of the 2020 election.
Publish date: September 11, 2018 © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT