One of Netflix’s biggest perks is its ad-free experience, but competitors don’t believe that can last. NBCUniversal and Hulu executives say it will eventually require a new revenue stream to keep up with the rising costs of new programming.
They may be right. In October, Netflix raised $2 billion in debt. Another $2 billion followed in April, bringing the company’s debt to around $12.3 billion.
Netflix will probably continue raising the prices of its subscriptions for the time being, but a tipping point seems inevitable.
Just how an ad-supported Netflix might look is unknown. Theoretically, Netflix could borrow a page from the playbook of Hulu (and soon AT&T’s WarnerMedia) and offer a version of its subscription-based service for a discount with ads. Or Netflix could copy the Spotify model and have a free version with ads as opposed to a subscription service that may come with additional benefits.
It’s also possible Netflix could incorporate ads in a way that doesn’t mirror the traditional model of TV commercials. Netflix has already experimented with product placement, such as Coca-Cola’s New Coke rerelease on its hit show “Stranger Things.” Future integration of advertisement is likely to come in new ways that haven’t been created yet, said Naylor.