Netflix, Inc. (NASDAQ:NFLX) could lose as much as 74% of its subscribers if it decides to place ads on its video streaming network. Last month, the firm started rolling out an increase in its subscription prices. However, the firm avoided raising the price for all its subscribers at the same time. The new price structure was designed to ensure that subscribers enjoy their currents rates for a couple of months before the new rates take effect.
Netflix was forced to increase its subscription fees in order to improve the quality of its service to viewers. The cost of doing business tends to increase when customers/rivals force a firm to improve it services. However, the firm was able to raise its fees without any fallout from its customers because they were actually expecting an increase in the rates.
Nonetheless, an increase in subscription fees could get tiring after a while and that’s why many video content producers tend to augment their revenue by showing ads. However, the result of a survey by AllFlicks has revealed that most of the subscribers are strongly against the idea of seeing ads on their screens.
Netflix dare not introduce ads
Netflix (NASDAQ:NFLX) has not made any move to introduce ads on its platform but AllFlicks reported that customers don’t want to see ads. A survey of 1,200 Netflix users on Reddit revealed that 90% of respondents would rather pay more to use the service than view ads. Interestingly, 57% of respondents said they wouldn’t mind paying $1 to $2 more for the service instead on seeing ads. 22% of respondents say they’ll love to pay $2 to $3 more on the service instead of viewing ads.
As strange as it might sound, 14% of respondents said they won’t mind paying $4+ more to use Netflix in lieu of seeing ads. However, if the firm decides to adopt ads in order to augment revenue many of the subscribers said they’ll not think twice about leaving the platform. In fact, 74% of respondents revealed that they’d rather cancel their subscriptions that have ads interrupt their binge-watching sessions.
AllFlicks further noted that “our survey offered a comment section, and those that took advantage of it overwhelmingly used it to voice their disapproval for ads. A noticeable minority resorted to profanity to voice their displeasure.”
Netflix loses streaming traffic to Amazon
The streaming of audio and video consumes about 71% of evening Internet traffic on fixed (non-mobile) networks based on a research report from Sandvine. However, Netflix seems to be getting a smaller cut of that pie in comparison to data from past records. Sandvine reports that Netflix now accounts for 35% of audio-visual Internet traffic volume, down from 37% at the start of the year. In contrast, the share of streaming traffic that Amazon now controls has slightly increased to 4%.
However, before Jeff Bezos’ fans roll out the drums, it might interest you to know that Amazon’s gain in streaming traffic is not necessarily Netflix’s loss. Experts have hinted that the recent improvements that Netflix (NASDAQ:NFLX) made to compress the algorithms for its streaming data might be the reason behind the drop in its traffic.
Sandvine CEO Dave Caputo noted that “Netflix’s optimizations means they can deliver more hours of video using less bandwidth, which results in lower data consumption for subscribers, and decreased capacity-related costs for operators.”