A few years ago, back in 2015 to be exact, Netflix decided to run a harmless little experiment. For an extremely brief stint, Netflix began advertising promos for its own original programming between episodes while customers were in the midst of a binge. Again, it was altogether harmless and not too different from strategies we’ve seen from companies like HBO. The reaction from Netflix subscribers, though, was anything but benign.
Subscribers were outraged — even though the promos were skippable — because they feared that Netflix was on the verge of introducing ads to the entire platform. The blowback was so severe that Netflix CEO Reed Hastings ultimately penned a post on Facebook and promised that Netflix would never embrace advertising.
“No advertising coming onto Netflix. Period,” Hastings explained. “Just adding relevant cool trailers for other Netflix content you are likely to love.”
Fast forward to 2019 and the media landscape surrounding Netflix has changed dramatically. Today, Netflix is as popular as ever and continues to add subscribers at an impressive clip across the globe. That said, Netflix’s success has prompted many of its content providers to reassess their relationship with the company. Some have opted to remove their content from Netflix entirely.
Consequently, Netflix remains committed to rolling out as much original content as possible. The strategy is sound, but the reality is that Netflix is burning through boatloads of cash as it churns out an absolutely staggering amount of original programming every single month. In turn, some outsiders believe that Netflix’s need for cash will only intensify and that the company will ultimately be forced to run ads in some capacity. After all, it’s not as if Netflix can keep on raising subscription prices indefinitely.
Speaking to this point, Hulu ad executive Linda Yaccarino and Peter Naylor recently said (via CNBC) that Netflix’s hand will be forced by basic economics.
“When you have to make more programming that’s not guaranteed to be a hit,” Yaccarino explained, “you have to spend more money, you have to build your brand, you have to help the consumer discover your stuff — the price will go up for the subscription, and it would be logical to mitigate those increases to take ads.”
While it seems far-fetched that Netflix would incorporate an ad-model similar to what we see on Hulu, Naylor believes Netflix could embrace advertising in more subtle ways, such as selective product placement.
“It can be interactive advertising or non-intrusive advertising,” Naylor said. “I think you’re going to see a lot of innovation from all of these new OTT providers because we’re allowed to. We’re not married to the clock. Fifteen and 30-second ads were a product of linear TV.”
Notably, this isn’t the first time outsiders have said that Netflix running ads is an inevitability. Just last month, a handful of ad executives at the IAB’s Digital Content NewFronts event all harped on the same point, namely that Netflix will have to incorporate ads in order to fuel its ongoing content costs.