Imagine watching “Designated Survivor,” “Ozark” or “Bird Box” on Netflix interrupted by car and deodorant ads. These ads would be on programs that subscribers pay $8.99 a month to watch.
After years in which Netflix subscribers saw uninterrupted movies, TV shows and live events without a single advertisement, those days could be gone in a flash. A number of media executives and people who follow the business practices of the public company believe that Netflix can’t afford to forgo the money ads will bring, even at the risk of alienating some subscribers.
Netflix has about 150 million subscribers, which would allow it to offer an almost unprecedented audience to advertisers. Sixty million are in the United States. That figure is more than double the number of people who watched the final episode of “The Big Bang Theory.” Netflix could draw large amounts of advertising that currently runs on network and cable TV.
Ultimately, Netflix will take advertising because it needs the capital, a number of experts have observed. Daniel Bischoff, marketing director at RTL AdConnect, the ad sales division of European broadcaster RTL Group, recently said, “Just look at the balance sheet. They will either need advertising or will have to raise prices.” Netflix has poured or will soon put billions of dollars into original programs. It is essentially in a content arms war with Amazon’s Prime service, a new streaming product from Disney and cable channels that range from HBO to Showtime. To make matters tougher, Apple likely will become a major competitor as well. Moreover, research has shown that few people will subscribe to more than two or three of the services.
[nativounit]
To improve its balance sheet, there is that second path. Raise the monthly subscription rate to $9.99 or $10.99. But it risks the ire of millions of subscribers as well. Financially, Netflix is trapped because, among other things, it just took on another $2 billion in debt.
Netflix also has to pay studios and television companies for most of its other programs, which number into the tens of thousands. Its library includes many of the 100 best movies of all time.
[recirclink id=553195]
[wallst_email_signup]
Top Gaining Stocks
Top Losing Stocks