Ads On Netflix? Expert Says Company Stands To Make Billions

CHIANG MAI ,THAILAND - March 31, 2018 : Close up Netflix website in laptop screen. Netflix being popular internationally.

After resisting the temptation to include an ad-supported tier on its platform for so long, why would Netflix ever make the change?

Well according to some analysts, the company could make an additional $US1 billion ($AU1.42bn) per year if it did.

Nomura Instinet analyst Mark Kelley wrote a note to clients about the idea over the weekend.

“An ad-supported tier could provide a lift to free-cash flow, reducing the need for Netflix to raise debt frequently, especially beyond 2021 into a potentially rising rate environment,” he said.

“Using what we believe are relatively conservative assumptions (launch of a free tier in the US in 2020, scaling to about a quarter of the paid subscriber base by 2021), we see a potential revenue opportunity of more than $1 billion per year, with nearly $700 million flowing through to net income, given the favorable margin dynamic of the advertising business,” he said.

And while Kelley indicated he believes the lure of ads might be “too difficult for Netflix to continue to resist,” he is unsure what it would look like.

Netflix could potentially make a free version of the service entirely supported by advertising or alternatively offer its ad-supported tier at a discounted rate, as its US rival Hulu does.

If Netflix was to add an ad-supported model, it would be doing so in an increasingly crowded streaming market.

Disney+ is not far off entering the mix, while the original content on Apple TV+ streaming service is due to arrive later this year.

In response, Netflix has doubled down on its original content, Netflix VP of original content Cindy Holland saying recently the company always knew “traditional players” like Disney would enter the fold.

“We believed this shift would all happen, it’s just taken many years longer than we thought,” Holland said, adding that the threat of such rivals potentially ending their licensing agreements with Netflix has prompted original content.

Please login with linkedin to comment

ad-supported hulu Netflix Streaming

Latest News

Scroll Media Recruits Costa Panagos From Twitch
  • Advertising

Scroll Media Recruits Costa Panagos From Twitch

Digital publisher network Scroll Media has employed ex-Amazon Twitch gaming executive Costa Panagos (lead image) to strengthen its Scroll Gaming capability. Panagos is highly experienced in game advertising and media sales professional with two years in account management at Twitch and three years in media sales at News Corp, so will bring his extensive media agency […]

Year13, Microsoft & KPMG Australia Launch AI Course For Gen Zs
  • Technology

Year13, Microsoft & KPMG Australia Launch AI Course For Gen Zs

School-leaver service Year13 has launched a new Artificial Intelligence course to upskill young people in AI, made in collaboration with Microsoft and KPMG, at an event to rally industry support behind youth AI fluency. The free online course AI Amplified which is part of Year13’s Academy aims to provide all young people with the opportunity […]

General Motors Snares Heath Walker From Scania
  • Advertising

General Motors Snares Heath Walker From Scania

General Motors has announced the appointment of Heath Walker (lead image) as the new marketing director for GM Australia and New Zealand, effective April 23, 2024. Walker brings a wealth of marketing and communications experience gained from working across various industries, including IT, sporting, and auto – notably Tesla, Nissan and most recently, Scania in […]