Netflix is one of the biggest platforms in television nowadays, and the continued trend of people cutting cords combined with the lack of any close competitor means that Netflix will presumably remain king of the streaming game for a while. Part of what has always made Netflix so appealing to the masses has been the lack of commercials, which is unique among the major streaming services. Now, however, execs from Hulu and NBC have expressed disbelief that Netflix will really stay out of the commercial game for good.
Linda Yaccarino, ad chief for NBCUniversal, stated at a Cannes Lions panel (via CNBC) that Netflix is going to have to spend more money the more that the company invests in "programming that's not guaranteed to be a hit."
Although Netflix is the home of some of the biggest TV hits in recent memory -- including Stranger Things, which returns for its long-awaited third season in just a couple of weeks -- it is also the home of a number of failed shows that never made it past the first season. Hits are never a sure thing.
The NBCUniversal exec suggested that in order to build the Netflix brand, money will need to be spent to help consumers discover what's available on the streaming service, which would lead to more rises in subscription cost. The logical next step would be for Netflix to incorporate ads to offset some of those costs and ideally not force a huge price hike on subscribers.
A recent study revealed that many subscribers would rather pay more than accept a Netflix that includes commercials, but does that mean Netflix will avoid ads forever? Netflix already gets creative with its marketing without including ads, with no greater example than Stranger Things.
To hype the release of Season 3, Netflix partnered with Coca-Cola to bring back New Coke, Baskin Robbins in honor of Steve's new job (and the all but universal love of ice cream), and -- my personal favorite -- Burger King for an Upside Down Whopper that is literally just an upside down Whopper.
Are these enough to offset increased costs as time passes? After all, most shows don't have the reach to warrant a partnership with major companies. I know I haven't seen any The Crown ice cream cones or Black Mirror hamburgers out there.
What about the exec of a rival streaming service? Hulu's Peter Naylor, head of ad sales, weighed in as well. Naylor suggested that "the future of ad-supported media does not resemble what we're doing today in terms of ad load or even ad shape," and the "ad experience is going to dramatically improve" with viewing on demand and "through an IP address."
Commercials in the future don't have to be what they've been for decades on network television, and Netflix has already shown creative marketing. (So has Hulu, for that matter!) Peter Naylor also made the point that 70% of Hulu users choose to pay $5.99 per month for its ad-supported content rather than the ad-free $11.99 per month. While that's great for Hulu, it presents a sticky issue for Netflix.
Netflix has never aired ads, so a switch to including ads could definitely rub subscribers the wrong way. There's also the point that the current cheapest plan for Netflix is $8.99 per month, which allows only one screen at a time in standard definition, with downloading on one phone or tablet. The next two options are $12.99 and $15.99 per month.
One possibility would be for Netflix to introduce a cheaper option including ads, or for Netflix to just continue with product placement. Alternately, maybe ads like the one hyping Starcourt Mall in Stranger Things Season 3 could be a source of revenue, as it showcased several retailers. Basically, Netflix subscribers shouldn't be shocked if ads start to turn up in Netflix shows, even if they don't play out like typical commercial breaks on network television.
There are plenty of viewing options on Netflix now and in the not-too-distant future without any commercial breaks.
