Commercials are coming to Netflix, marking the end of an era.
While this may come as a surprise to those who remember Netflix’s stance against commercials, Netflix has been struggling for a while and has been talking about adding a tier with commercials for months. The new tier branded “Basic with Ads” will cost $6.99 a month and become available in the US on November 3. Netflix announced that subscribers of this tier can expect an average of 4 to 5 minutes of ads per hour and will get — with a few exceptions due to rights issues — almost everything a Basic subscriber currently gets for $9.99.
The proliferation of streaming services places Netflix in a weak position, which is probably why Netflix changed course. In August, Forbes reported, “it’s [Netflix] also one of the only streaming services to lose paid subscribers, falling by almost 1 million subscribers since March and nearly 1.2 million since December.”
Unlike Peacock, Paramount+, HBO Max, and Disney+, Netflix doesn’t have a huge back catalog of original content to draw from. Sure, you can pull up an old episode of Lilyhammer, but that’s not the same thing as having nearly the entire Disney animated canon — starting with Snow White and the Seven Dwarfs (1937) — at your fingertips with a Disney+ subscription.
Back in 2007, Netflix, Amazon Instant Video, and Hulu were the only kids on the streaming block. Once the media conglomerates caught onto how much money there was to be made in the streaming game, Comcast, ViacomCBS, Warner Brothers, Disney, and others decided they wanted a bigger cut than they were getting from contracts with the major players in streaming and decided to strike out on their own. In the case of Hulu, Comcast realized it could make more money through Peacock than continuing its partnership with Disney, which of course has its own streaming service in Disney+.
Ironically, most major streaming services are not profitable since every major media company has its own streaming service. If you subscribed to everyone, it would be more expensive than the average cable bill — and that’s without a cable substitute like YouTube TV.
By offering a tier three dollars cheaper than the current lowest priced tier, Netflix hopes that subscribers opt to downgrade rather than cancel their subscription. However, part of Netflix’s brand and appeal for the last 15 years has been its lack of commercials.
Will Netflix current Netflix subscribers opt for the cheaper plan? Will former Netflix users subscribe again? Or will most people ignore the ad-supported tier like they do on HBO Max? We can’t predict the future, but it’s worrisome that Netflix is so desperate that it is shifting a core tenant of its brand in the search for profits. Investors may win in the short-term, yet in the end we all lose. It’s only a matter of time before Netflix increases the price of all its tiers to the point where the majority of subscribers will have to choose between “Basic with Ads” or no Netflix. At the rate Netflix is losing subscribers and content to other streaming giants, I don’t think the company will like the answer.