Subs warm to ad-based Netflix plan but only with significant discount | Media Analysis | Business
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Investigating the ramifications if speculation regarding ad-supported Netflix subscription plans were true, Hub Entertainment Research has discovered a potential yet very conditional acceptance of such a move.
Hub netflix ads 4July2019
Indeed in its Monetisation of Video report — conducted in June 2019 among 1,765 US consumers with broadband, who watch at least 1 hour of TV per week — Hub found that many of the leading subscription video-on-demand service’s customers would be open to the idea, but only with a significant discount off the current ad-free subscription.

The study fundamentally warns Netflix risks losing about a quarter (23%) of its subscriber base if it switched from ad-free to ad-supported—with no reduction in subscription fee. Fewer than half (41%) of subs say they’d definitely or probably keep their subscription, with the remainder undecided.

In addition Hub found that it was only at a $2-$3 lower price point where the company saw stronger levels of retention and fewer potential subscriber losses. At $2 less per month than the current fee, just over half (53%) said they’d keep Netflix and 14% would drop. The remainder were unsure. At $3 less per month, three-fifths said they’d keep the service and 12% would abandon it.

In what may be encouraging news for Netflix, Hub’s report revealed that if the SVOD leader offered a $3 lower price with an ad-supported tier as an option, it could persuade a majority of the survey subscribers to sign up for the alternative.

It warned though that introducing an ad-supported tier at the current subscription price, and raising the ad-free price, could lead to significant defections. If the current ad-free plan increased by $3, almost three-fifths (58%) would switch to an ad-based tier at the current fee. Moreover, a fifth of current subs said that they wouldn’t be happy with either option, saying they’d drop Netflix entirely.

“The success of any Netflix ad-supported plan—whether to replace or add to its current offering—will naturally depend on whether consumers feel they’re getting a sufficient price-break return on their ad-viewing investment,” said Peter Fondulas, principal at Hub and co-author of the Monetisation of Video study.  “But one thing is clear from these results: after one increase already in 2019, any attempt by Netflix to use an ad-supported plan as a reason to hike its ad-free price again could seriously backfire.”