If Netflix had concerns about shifting from ad-free subscriptions to offering a lower-priced, ad-supported tier, those worries are likely easing now.
According to Deadline, Netflix has succeeded in attracting over 70 million monthly active users to its relatively recent ad-supported tier offering, which launched roughly two years ago. Whether it’s a sign of the economic times or just acclimation to ads being placed in a paid subscription streaming service — much like Amazon’s Prime Video enacted earlier this year — it appears many consumers are content to save on monthly fees by having ads injected into their favorite shows and movies.
Half of New Subscribers Signing Up for Netflix Are Choosing Ads Over More Expensive Options
What’s more, according to a blog post by Netflix’s president of advertising, Amy Reinhard, 50% of new subscribers are opting to sign up for the ad-supported tier rather than the more costly ad-free options.
With the much-hyped match between celebrity YouTuber-turned-boxer Jake Paul and heavyweight legend Mike Tyson set for Nov. 15 — an event that Reinhard mentioned alongside other premium live events featuring high-profile ad sponsors — it’s clear that the streaming giant is banking big on advertising as part of its future strategy.
Another major win for Netflix: WWE’s flagship program, WWE Raw, will begin streaming exclusively on Netflix in January 2025. With VideoAmp partnering to deliver clean marketing metrics of WWE Raw to interested ad sponsors, according to Reinhard, this further firms up the company’s pivot toward massive ad partnerships.
Furthermore, with its heavy lean into live sporting events being made apparent, Netflix also seems to be wagering on the continued growth of sportsbook betting opportunities. As shared in the blog post, FanDuel will serve as an exclusive pregame sportsbook betting partner during Netflix’s NFL Christmas Gameday coverage. The U.S. sports betting market was estimated to be worth nearly $14 billion annually as of 2023, per Grand View Research, with a compound annual growth rate of 10.5% from 2024 through 2030, making this an extremely attractive market for streaming services to be aligned with.
Is Ad-Supported Streaming Here To Stay?
While it seems clear that Netflix has shifted its focus toward capturing more subscribers — and greater revenue through lucrative ad partnerships — via an inexpensive ad-supported tier, what about other market competitors? Amazon’s Prime Video also boasts ads on its most modest tier, which is included with an Amazon Prime membership, and Hulu also includes ads in its most basic plan.
The vast majority of another booming category of streaming services, deemed FAST (free, ad-supported streaming television), also embrace the practice.
There has been something of a grand shift toward free ad-supported streaming services, particularly since the dawn of the COVID-19 pandemic, as TheWrap recently outlined. Already, FAST services such as Tubi and Roku have surpassed major paid services such as Max and Paramount+ in terms of usage shares, according to Nielsen’s monthly Gauge reports. However, the success of FAST services seems to be complementary in nature, rather than coming at the expense of premium paid services. Users are still shelling out to pay for Netflix and other paid streaming subscriptions rather than relying on free TV entirely.
With over 3,500 FAST channels available to Americans, according to Ampere Analysis as provided by TheWrap, and about one-third of the U.S. population watching FAST content at least once a month based on eMarketer’s forecast, it seems a foregone conclusion that ad-supported streaming is here to stay.
“Assuming you’ve got some content — and a lot of the people who run these channels own that content — then your economics start to become very attractive, assuming you can sell the advertising,” Ampere Analysis analyst Guy Bisson told the outlet. “You can run a channel very cheaply, and thus make a viable business of it in a way that you simply could not have done before streaming came along.”
