zlacker

The problem is: even at a higher price point, the ad-free versions generate less revenue.

"“We’re obviously trying with our pricing strategy to migrate more subs to the advertiser-supported tier,” Disney Chief Executive Bob Iger said in August during a call with investors to discuss the company’s quarterly results."

"Disney, Netflix and Warner Bros. Discovery have recently said the ad-supported versions of their streaming platforms generate more money per user than their ad-free counterparts, as the advertising revenue more than offsets the lower subscription cost." -- https://www.wsj.com/business/media/netflix-price-increase-ac...

"Netflix executives have said that the ad tier brings in more average revenue per user than its $15.49 standard plan." -- https://www.wsj.com/articles/netflix-reworks-microsoft-pact-...

>>ksherl+(OP)
Thanks for those links. This indicates that (1) users consistently undervalue their ad data, or (2) the ad data market is misfunctioning (since so many of these companies go on to spend billions on advertising their own unprofitable services). Or both!

The entire situation is ridiculous. We’ve somehow managed to build an even more exploitative user-service relationship than Cable TV.

>>woodru+N
ads have two functions: to drive more traffic, and to preserve mindshare for existing brands. Coke is not buying ads because you don't know what Coke is, Coke is buying ads so that Pepsi or somebody else's ad doesn't take your mindshare away.

>>bobthe+93
Right, but neither of these functions explains the circularity: if Netflix loses money on every paying subscriber versus the "ad watching sucker" demographic, why spend billions of dollars a year[1] advertising your paid plans?

(Maybe I'm being too literal here -- it'd be fair to argue that Netflix mostly just advertises their shows, not the plans themselves directly.)

[1]: https://www.statista.com/statistics/688525/netflix-ad-expens...

>>woodru+e5
Where do they say they lose money on ad free paying subs? Maybe they make less profit than on free ad users.

>>bellta+Q7
Sorry, bad phrasing -- they don't lose money in an absolute sense, but make less on full-paying users than ad-watching ones.

>>woodru+e5
Some advertising of the ad-free paid plans is good because it takes the segment of customers who will not tolerate ads and gives them an option, rather than lose them.

>>bobthe+93
Reminds me of the mindblowing album Dispepsi by Negativland: https://www.youtube.com/watch?v=b8S3xlIXObA

>>ksherl+(OP)
One article says their rate is $55 CPM[0][1] & the ad supported subscription costs $6.99 vs $15.49 so $8.50 difference.

So if a viewer watches 155 ads (impressions) in a month they have earned Netflix more money with their eyeballs than they saved in subscription cost.

Netflix says people should expect “about 4 minutes of ads per hour” which is notably not directly equivalent to impressions. If each ad is 30 seconds it takes about 39 hours to reach 155 ad impressions. That’s close to 80 minutes per day each month.

Another way of looking at it is that you get paid $6.58 per hour to watch ads, up until you’ve watched 77.5 minutes of ads. After that you are paid $0 to watch ads.

[0] https://digiday.com/media-buying/netflixs-cpm-still-under-bu...

[1] They also say it was reduced from $65 (131 impressions) and plus this is a sales game so the rates will be up and down all the time based on KPIs and competitions to win steak knives and more comprehensive media buy deals.

>>ksherl+(OP)
If that is true then just give it away. It galls me to hear that the ad driven product makes more than the product I pay for. Here’s a deal, I’ll keep watching, you show me ads and we’ll share in the revenue.

>>woodru+N
People still paid for Cable TV and got ads too. And I'd go crazy if I had multiple in a row Cable TV ads on youtube like it is on TV without the option to upgrade to premium.

>>ksherl+(OP)
But do they account for people like me who after seeing too many ads just say "Fuck it, I'm out of here"? Cable TV companies also tried to show bunch of ads to already paying customers who then started leaving in droves as soon as there was a way out[0].

[0]: https://www.statista.com/topics/4527/cord-cutting

>>dmix+Wg
At first Cable TV networks had little advertising. It seems to be a natural progression of all mass-media to eventually enshittify. It's not if, it's just when?

>>127361+R11
> At first Cable TV didn't have any ads.

100% non-factual. Cable had ads from day one, and the majority of cable-only TV channels had ads from their first day of programming.

>>vel0ci+4d1
Likely fewer ads at the beginning, and then gradually more with time. Sorry. I'll edit my post.

https://www.nytimes.com/1981/01/11/us/advertisers-look-close...

>>127361+Nl1
The 10x of revenue increase projection in five years is potentially due to the fact cable subscribership increased 2x in those 5 years, several more cable-only channels that came out, and the market for cable advertising became more proven thus the perceived value of each ad increased. It doesn't require there to be considerably more ads shown per hour of television. Your article isn't exactly strongly supporting your claims as well as you might think it does.

But I do agree, over the years there has been more advertisements per hour of television.

>>woodru+W7
media is always about network effects. you want to talk to your friends about big shows. that only works if they watch the big shows, ad-free or not.

>>ksherl+(OP)
Double dipping will always be more profitable.

Think about it, people pay you a monthly sub and you get paid per ad you show?

From an executive POV it’s delicious. And there’s no real way of competing with a flat fee all you can eat sub unless you hike up that price astronomically, because pay per ad will almost always outpace the sub fee.