The Old Guards Becomes a New Threat
Historically, Netflix has been able to increase prices without negative overall impact, even when customers have threatened to cancel. But the streaming world is changing. Media giants are launching services of their own—and they’re bringing their vast content libraries with them.
AT&T, Disney and Viacom are set to join the over-the-top (OTT) market in 2019. NBCUniversal will debut its ad-supported streaming platform in 2020. In addition to challenging Netflix on price, these new competitors present an additional threat to Netflix: the possibility of losing some of its most valuable content.
“Companies plan on weaning off the library content that exists on those ad-free platforms right now,” said Linda Yaccarino, chairman of advertising sales and client partnerships at NBCUniversal, during our "Behind the Number" podcast.
It’s still too early to tell what most of these companies will do with their content. But news that Disney will pull its programming from Netflix, along with the now-infamous $100 million payment Netflix made to keep “Friends,” have raised questions around how much Netflix will have to pay to retain its popular non-original content—if it will be able to retain it at all.
“There’s going to be a balance of power shift,” Yaccarino said. “And I believe what you’ll see—and as demonstrated by the announcement that we had—that ad-supported product, delivered in the right way to the consumer, is here to stay.”
Consumers Don’t (Necessarily) Mind Ads
Netflix's subscription-based model helped define the OTT landscape, but that doesn’t mean subscribers aren't open to ad-supported options, especially if they're being served the right ads at the right cost.
According to a September 2018 survey by the Interactive Advertising Bureau, 73% of adults who typically watch streaming OTT video say they watch ad-supported OTT video. Additionally, 59% said they don’t mind seeing ads as long as they can view content when they want, while 56% said they don’t mind watching ads if they’re paying less.