Netflix's Ad Plans Could Hit the Competition Where It Hurts
Netflix (NASDAQ: NFLX) plans to introduce an ad-supported tier to its streaming service in 2023. The shift comes after a slew of competitors entered the market, most of which are priced well below Netflix's standard plan pricing of $15.49 per month.
While an ad-supported tier will help Netflix compete on price, it has a lot of potential to hit its competition where it really hurts: by cutting into television ad spending.
Ultimately, Netflix wants to build "a better-than-linear-TV advertisement model," management wrote in its letter to shareholders.
The combination of Netflix's high-demand premium content and the potential for it to build technology has had some analysts estimating the media company could generate as much as $5.6 billion in annual revenue.
Creating a massive new source of premium ad inventory in just a couple years means ad budgets will have to shift.
Creating a massive new source of premium ad inventory in just a couple years means ad budgets will have to shift.
Warner Bros. Discovery, Paramount, and Disney all generate significant amounts of revenue from linear TV advertising around the world.
Many subscribers defected after Netflix's latest price hike, but they could come back as the prices from the competition move higher and streaming pioneer starts to look like a great value again.