Imagine you’re watching the season finale of Stranger Things, and just as the climax unfolds, it’s abruptly interrupted by a Coca-cola commercial. Well, that may not be far from the future, as advertisements may be taking their next victim – Netflix. The famous entertainment subscription service will be adding a low-cost subscription tier that will have advertisements in addition to the current ad-free options, according to The New York Times (NYT). 

The news came when Netflix alerted its employees of the decision in a note, said the NYT in an article detailing Netflix’s business struggles in which they lost 200,000 subscribers this year during the first three months (for the first time in a decade). They are expected to lose millions in the upcoming months. Netflix executives want to activate the ad subscription towards the end of the year.

“Since the subscriber announcement, Netflix’s share price has dropped sharply, wiping away roughly $70 billion in the company’s market capitalization,” reads the NYT.

Apparently, television advertising adds a tremendous amount of financial cushion for streaming services. 

“Media agency Zenith predicts advertisers will spend $65 billion on TV ads this year, up 4 percent from last year. Even in 2022, people still watch a lot of TV programming. But they’re increasingly watching it on streaming services on their TVs,” VOX reported.

Spinnaker asked Dr. Leselie Gordon from the UNF Marketing program to share some thoughts on Netflix’s business challenges and how advertisements could help their business. 

“I have questioned for some time why Netflix didn’t patrol their subscriber usage more effectively,” said Dr. Gordon. “For example, the company allowed up to five users on a monthly subscription; therefore, subscribers could share their account passwords with non-subscribers outside of their households. That practice negatively affects revenue, as now you have non-subscribers using the streaming service for free.”

Dr. Gordon explained that a streaming service like Netflix, just like a network TV station, benefits from advertising because advertisers pay for their airtime during shows that they’ve determined their target audience watches to expose them to their products/services.

Dr. Gordon went on to talk about how adding a subscription tier with advertisements could help Netflix. She says that by charging advertisers for space, Netflix can increase its profits. Although, it will be detrimental to the customer experience because people would have to sit through ads that they sometimes don’t like.

“However, the good news for consumers is that advertising revenue helps mitigate their subscriber fee (keep it low, or in some instances, maintain the service as ‘free of charge),” Dr. Gordon explained.

Spinnaker asked Instagram users their thoughts on Netflix’s potential option of an ad subscription: 

“If it’s cheaper, then I’d totally downgrade because Netflix has gotten SO expensive,” responded one user.

Another said that it “defeats the whole purpose of paying for a subscription.”

One person responded by saying they “stopped paying for Netflix [because] it’s not worth it anymore.”

For years, Netflix has resisted advertisements and was famous for being ad-free. Now, things have changed, and they may need ads to keep up with competitors.

Netflix isn’t the only streaming service planning to add a lower-cost ad tier subscription, According to VOX. Disney+ is also planning on implementing one by the end of the year. 

In this digital age, advertisements are taking every chance they get to reach an audience. 

“With digital marketing (emails, text messages, social media) now supplementing traditional marketing (TV, radio, billboards), consumers are exposed to countless advertisements on a daily basis,” Dr. Gordon said.

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