Dive Brief:
- Almost half (46%) of Netflix subscribers in the U.S. would consider switching to the streamer’s upcoming ad-supported tier, according to a new survey from Samba TV and Harris X that was shared with Marketing Dive.
- Forty-five percent of users were open to an option discounted by half of their current subscription fee and carrying a maximum of five minutes of ads per hour. This seems most closely aligned with the model Netflix appears to be leaning towards, per the research.
- Interest in the ad-supported tier was more prevalent among older and lower-income consumers, with 52% of baby boomers and 48% of Gen Xers more likely to shift. Those types of insights could theoretically affect the brands that advertise with Netflix as well as the types of programming carrying ads.
Dive Insight:
Netlfix’s ad-supported tier is a gamble for a streamer that long resisted the idea of running commercials but is in need of new revenue drivers as more people drop the service. Harris X and Samba TV’s findings indicate that a substantial portion of current users would at least consider making the switch, with ad load the big deal breaker. The results were drawn from a poll of 2,500 adults, 1,300 of whom are subscribers and 1,200 of whom are non-subscribers.
The survey suggests five minutes of commercial time per hour is the threshold most viewers tolerate, and anything more results in a drop off in interest. Less than one in three current subscribers would agree to 10 minutes of commercials or more per hour even if the service was otherwise free.
It almost certainly won’t be free, as recent reporting indicates the retail price could land between $7 and $9 per month. That’s about half the current standard package that comes in at $15.49 in the U.S.
A cheaper option could hold appeal as inflation pinches consumer wallets and more people cull subscriptions in a crowded market. A majority of poll respondents making under $75,000 were intrigued by Netflix’s ad-supported tier versus 42% in higher income brackets.
On the other hand, Netflix could struggle to win key young consumer groups who are digital natives and less accustomed to commercial-heavy viewing experiences familiar to generations raised on linear TV. Just 38% of Gen Z Netflix users would try out the ad-supported tier, Harris X and Samba TV found.
That could be a problem for Netflix as it negotiates with advertisers who have been eager for the chance to market around its programming. Netflix and ad sales partner Microsoft are already said to be asking for rates high above industry standards, according to the Wall Street Journal, and are relatively inexperienced in the space.
On the other hand, the appeal of the ad-supported tier to people not already subscribed to Netflix “appears to be very strong,” per Harris X and Samba TV, as 92% of that group already engage with ad-supported streaming platforms. One and three of the cohort are under 35.
“The exciting value proposition from Netflix's upcoming ad model lies in the possibility it offers to bring in net new or lapsed subscribers,” said Samba TV CEO Ashwin Navin in a statement.
While Netflix has previously stated the ad-supported plan will go live early next year, signs point to launches in some markets starting Nov. 1 as the company races against rival Disney+, which is rolling out a similar option on Dec. 8.
