There has long been speculation over whether or not it would be beneficial for Netflix to run ads on the service.
With the streaming space growing increasingly crowded, an ad-supported model would serve as a way for Netflix to potentially undercut competitors like Disney+ and Apple TV+.
Nomura Instinet analyst Mark Kelley last year said Netflix stands to make an extra $1 billion per year if it were to introduce advertising.
But speaking on the company earnings call for 2019, Netflix CEO Reed Hastings laid out the logic behind Netflix’s refusal to sell ads.
“Google, Facebook and Amazon are tremendously powerful at online advertising because they’re integrating so much data from so many sources,” he said.
“There’s a business cost to that, but it makes the advertising more targeted and effective. So I think those three [companies] are going to get most of the online advertising business.
“To grow a 5 or 10 million dollar advertising business you have to rip that away from other advertisers – say Google, Facebook and Amazon – which is quite challenging.
“In the long-term, there’s not easy money there.”
Rather than pouring money into an advertising service, Netflix will continue to invest in content, something it believes “drives word-of-mouth, improves retention and grows paid memberships”.
“We have a much simpler business model, which is just focused on streaming and customer pleasure,” Hastings continued.
“So we think with our model we’ll actually get to a larger revenue, a larger profit, larger market cap because we don’t have the exposure to something that we’re strategically disadvantaged at, which is online advertising against those big three.”
Hastings’ defiance came as the company reported $US20 billion in revenue for 2019 and $US5.47 billion in revenue for the fourth quarter.
Paid subscribers also grew year on year by more than 167 million.
A new player has arrived on the Brisbane scene – and it’s growing fast. Colony is a strategic communications advisory that started in Port Moresby in 2015, working with major Asia-Pacific clients like the Brian Bell Group, Digicel and Puma Energy. To build a greater capacity to support the Port Moresby office and serve these […]
AnalogFolk Group Launches Behavioural Transformation Consultancy, MindWorks Consulting. Focused on delivering improved business outcomes, the consultancy applies behavioural economics to both marketing strategy and organisational design. In a rapidly changing world, companies need to be nimbler than ever before, reading and reacting at pace to changing market conditions, competitor landscapes and customer needs. New technologies […]
Beloved radio personality, Byron Cooke is back on Melbourne breakfast radio, announcing he will host KIIS 101.1 breakfast this morning and will back behind the mic until February when the Jase & Lauren in the Morning show returns. The announcement follows news regular breakfast co-host, Jase Hawkins, is expecting his third baby any day now. “I’ve been mates […]