Netflix is considering opening the doors to advertising for the first time, a major opportunity for marketers looking to reach their target audience amid the grasp of streaming television.
The announcement came as part of an earnings call on Tuesday as Netflix reported that it lost 200,000 subscribers in the first quarter, well short of its projections that it would gain an additional 2.5 million subscribers in that period. The dip represents the first such contraction for the streaming service in years.
The company sees the subscriber loss as a sign that they need to make their offering more competitive. Streaming ads are one way to reduce costs for viewers.
“Those who have followed Netflix know that I’ve been against the complexity of advertising, and a big fan of the simplicity of subscription,” CEO Reed Hastings said on the earnings call. “But, as much as I’m a fan of that, I’m a bigger fan of consumer choice.”
Hastings said the company would still offer an ad-free option at a higher price point, allowing consumers who are “advertising tolerant” to pay less. Other streaming providers, including Disney+ and HBO Max are also testing streaming ad models.
As the longest standing holdout on advertising, Netflix’s openness to the business model could usher in a wave of ad opportunities in streaming. YouTube has long been a home for innovative digital video ads, but marketers are eager to reach captive audiences as they binge shows and movies on streaming services.
Ad inventory has been relatively low thus far, Brian Wieser of GroupM told Variety.
“There has been a meaningful reduction in advertising inventory in streaming,” Wieser said, speculating whether Netflix’s announcement will encourage competitors to “push up the ad loads.”
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