Nomura sees $1bn ad opportunity for Netflix
Analysts at Investment bank Nomura calculate Netflix could earn $1bn a year by launching an ad-funded service (Variety).
Key points
- Nomura calculates $700m would drop to bottom line if Netflix launched ad-funded model
- Impact of cannibalisation on subscription revenue not factored into equation
- Hulu says around 70% of its viewers are on cheaper ad-funded package, generating around $1.4bn in ad revenue in 2018
- Rivals such as Disney, NBC Universal and others coming to market with cheaper prices
$1bn a year is a lot of money for a company burning cash and with $10bn of debt. But Netflix has built its business upon ad avoiding chord cutters and $1bn is relative peanuts to risk damaging those relationships.
As Hulu has found, there may be no harm in giving customers the choice. But what will be more interesting is whether Netflix retains its pricing model of a flat fee for all users, regardless of how much they consume, or whether it can find ways of making more money without stretching subscription fees beyond what customers are willing to pay.
Data is what Netflix has mined to brilliant effect in building its success - and it would be no surprise to see the company start to leverage its lead in whole new areas while its new rivals play catch up.
