In the year since Netflix launched its ad-supported tier, the ranks of monthly active users has swelled to 15 million. This is a fantastic improvement on May’s 5 million. With their global rollout still in progress, what does this mean for Netflix and the wider entertainment industry? Our expert entertainment lawyer in USA, Brandon Blake (from Blake & Wang P.A.) dives deeper into the news.
Most Growth in the Third Quarter
According to Netflix themselves, Q3 saw a massive 70% uptick in growth for their ad-supported tier (‘Basic with Ads’). However, we still lack clarity on how many of Netflix’s 247 million global subscribers are using the tier, which is now the cheapest they have on offer.
The move to advertising-supported tiers has been something of a trend this year. For Netflix itself, it also was something of a corporate reversal- there was a time when they promised there would ‘never’ be ads on the service. However, their partnership with Microsoft (for the data side of selling ad inventory) came after a series of poor quarterly performances and a massive hit to its market value.
A Booming Trend
Hot on their heels, we saw Disney+ buy into the ad-supported model, and many others have followed since. The streaming industry has been on the lookout for the ‘magic’ economic model to help make the streaming industry as lucrative as its initial COVID-fueled boom promised. It seems to have decided advertising money is the way of the future- ironically returning us to a streaming experience more closely modeled on older broadcast models.
Netflix paired the launch of the ad-supported model with a rollback on open password sharing, a dual-pronged approach that seems to have driven much of the shift to its cheaper tier for users. Subscriber growth, increased cash flow, and a return to profitability have followed.
While offering ad-supported tiers is unlikely to be the end of streaming’s need to adapt to current economic trends and viewer tastes, it’s certainly proven to be a lucrative model, and one that will shape the future of streaming for decades to come.
Film and Television 