Netflix has always been completely free of ads, and proudly so. In fact, during its China launch in April, CEO Reed Hastings said, “Our focus and our expertise is really in commercial free.” A month later, users in the United States started seeing ads before and after watching a video.
Was Hastings lying? Is Netflix going to become just like any other TV network, where you have to sit through commercials while watching a television show or movie? Let’s sort the fact from fiction.
What Actually Happened
Over the past few days, some people have been reporting how Netflix has been testing ads that run before and after you play a video. Well, it’s true, but not in the way you think. The bad news is that Yes, Netflix is thinking of running ads after a video. The good news is that these ads will be trailers for other shows, particularly Netflix Originals such as Orange Is the New Black.
These ads were quietly rolled out to a few users, but not to all. Naturally, in the age of social media, it didn’t stay quiet for too long. Hell hath no fury like a Twitter user scorned:
There was so much hullabaloo about this that Netflix CEO Reed Hastings made an uncharacteristic post on Facebook, clarifying the situation:
No advertising coming onto Netflix. Period.
Just adding relevant cool trailers for other Netflix content you are likely to love.
About Those New Netflix “Ads”
Netflix has been pretty clear that these advertisements will not feature any third-party advertisers, which means you won’t see random commercials, even if it’s one of the best Super Bowl commercials ever.
What you will see are trailers and teasers. Yup, trailers, much like what you see when you go to the movie theater, even though cinema is dying because of you. It makes sense for Netflix to do this since it is investing heavily in creating original shows like House of Cards, releasing entire seasons on the same day for fans keen on binge-watching.
“Premium cable and streaming video channel HBO, Netflix’s feted rival, also makes a big deal out of being advertisement-free, and it does a similar thing before its shows,” writes Quartz. “It also makes sense for Netflix to push its own shows (it is already advertising them heavily on broadcast and cable TV), which are increasingly becoming the main reason to subscribe to the service.”
There is ongoing discussion about whether these trailers qualify as ads. A common point being raised is that no one thinks trailers included on a DVD or shown at the theater are “advertisements”, so why is Netflix being treated differently?
Helping users discover the right content is still a challenge for Netflix, which was the main thought behind its last redesign. That’s what these trailers will do. But it’s skewed in favor of Netflix, which is both platform and content provider in this case. After all, it is in Netflix’s best interest for you to watch the TV shows they made over TV shows someone else made. With that conflict of interest, can you be sure that Netflix is recommending the best possible show for you?
In case you don’t trust Netflix, just so you know, there are other ways to find the perfect movie to watch right now.
Could Netflix Add Ads In the Future?
Netflix has always stressed the importance of being ad-free, but there is a problem with this picture. Recently, the chief executive of WPP — the world’s largest marketing company and an investor in several content producers — pointed out that while Netflix’s ad-free model is powerful, it isn’t yet profitable. And it has promised $9.5 billion over the next five years to owners of the content currently being streamed.
“In those circumstances Netflix will have to raise subscription prices, and we know what happened last time, or have alternative revenue generation opportunities, one of which will be advertising,” said WPP’s Sir Martin Sorrell, referring to when Netflix lost 800,000 subscribers over a price hike.
Commenting on an Australian Netflix competitor called Stan, a PriceWaterhouseCoopers analyst said video advertising is inevitable on streaming services. Video advertising is forecasted to grow at “36 percent per annum for the next five years”, which makes it too lucrative to ignore.
However, eventually turning to ads might be a problem, even if does turn out to be a necessity. People hate ads, especially on services like Netflix. The main reason being that several Netflix users have come from the ad-free experience of piracy.
Redditor samsaBear got the top rated comment on the Netflix discussion for saying just that: “I’d just cancel and go back to downloading stuff I wanted to watch. Netflix have a great model (at the moment), doing something like this would really f*** it up (in my opinion).”
Would You Use Netflix for Free with Ads?
What makes Netflix great is an ad-free, premium experience. And this ad-free policy has made it popular, with the company boasting a userbase of over 60 million subscribers, according to its Q1 2015 earnings. Go through the Reddit discussion and you’ll find several users saying they would be willing to pay more if it meant the continuation of a service completely devoid of advertising.
The big question is whether Netflix will introduce ads in the future. Most users are clear that they won’t pay for it, but what if it was free? As part of the streaming generation, would you be okay with a free Netflix powered by ads? Please let us know your thoughts in the comments below. And in the meantime, calm down.