Netflix has once again re-iterated the fact that they don’t have any plans now or in the future to start running commercials on its streaming service. The brand believes that being ad-free is a core part of what makes them so attractive, and why users are loyal to them. Their long term view mission statement to investors says “We don’t offer pay-per-view or free ad-supported content. Those are fine business models that other firms do well. We are about flat-fee unlimited viewing commercial-free.”
In a letter to their investors, Netflix said : “We, like HBO, are advertising free. That remains a deep part of our brand proposition; when you read speculation that we are moving into selling advertising, be confident that this is false. We believe we will have a more valuable business in the long term by staying out of competing for ad revenue and instead entirely focusing on competing for viewer satisfaction.”
There’s been regular speculation that Netflix could be tempted into selling ads to sustain its high levels of content spending. Nomura’s Instinet revealed in a report that Netflix could generate more than a billion dollars in ad revenue each year if they dabbled with it. For eg. Hulu generated $1.4 billion in ad revenue in 2018. More than 70% of their users are on a cheaper plan with commercials.
We love the way Netflix is navigating their business model, and keeping customer experience at the core of all their decision making. Kudos!