How Could it Fail?
All that said, Netflix’s ad supported tier isn’t’ guaranteed to succeed. As Forrester VP and Principal Analyst Joanna O’Connell recently said in an interview with Yahoo Finance, Netflix will need to find a way to deliver ads, “in a way that doesn’t suck.”
If they fail to meet that benchmark, Netflix risks further damaging a brand that, up until very recently, was uniformly opposed to advertising on an almost ideological level.
“We, like HBO, are advertising free,” Netflix said in a 2019 letter to shareholders. “That remains a deep part of our brand proposition; when you read speculation that we are moving into selling advertising, be confident that this is false.”
Even if Netflix can convince users to jump on board, there’s no guarantee the ad business model will mature and generate cash the way they intend in a fast enough timeline to make it desirable.
“Netflix is balancing new ad revenue coming in with the potential of subscription revenue being lost from existing users downgrading,” Wedbush Securities media analyst Michael Pachter told Time in an interview. “But it’s going to take some time for the advertising business to fully monetize.”
