Recently Fox News Business reported that Netflix turned down a deal from Ritz to advertise Ritz Crackers in their streams.
“It’s fundamental to that control orientation that we don’t cram advertisements down people’s throats,” Reed Hastings said during Netflix last earnings call.
Netflix is banking on the idea that more people will sign up to Netflix without ads generating more revenue. Ads could be extremely lucrative for Netflix with the average cost of a prime time ad on TV going for over 100k. With the amount of money Netflix is spending on content many investors are asking why they do not include ads in their streams or on the site. Including several large and reputable investment firms.
Thankfully for the 50 million subscribers it does not sound like they will have to worry about ads being a part of Netflix.
If you compare Netflix’s 50 million monthly subscribers to Hulu’s 6 million subscribers it seems that the current Netflix model is working. Ads are often listed as the main reason people do not subscribe to Hulu Plus.
Recently we have seen several companies come up to challenge Netflix. Verizon’s partnership with RedBox to create RedBox Instant is the most serious challenge that just recently announced they are closing their service.
If Netflix can maintain their dominance and continue to offer original content their lead maybe so large soon it will be impossible for competitors to get into the market. At that point the question is will Netflix abandon their principles and include ads when they are the only place to see many great shows and movies like Orange is the New Black or the new Adam Sandler movies would large numbers of subscribers leave?