Netflix Gives Up $2 Billion A YEAR In Ad Revenue To Keep Users Happy
Here’s an easy question. If Netflix started showing ads, would you cancel your subscription? What if, you had to pay more to maintain your service ad free? These are the questions that the hard-working people over at the world’s largest online streaming service have to deal with.
Don’t worry though,
On average, Netflix users watch about an hour and a half worth of content a day. From the traditional, cable side, a 30-minute program on TV would have on average of 7.75 minutes worth of advertising. In 2013, the average ad time over the course of an hour was 15 minutes and 38 seconds. Then, the average cost of a 30 second ad slot works out to about $112,000 during prime time.
Based on Klein’s calculations, there’s roughly 56 total ad slots available over a 90-minute period. So, $112,000 x 56 = $6.272 million in ad revenue a day, or $2.29 billion over the course of a year.
I don’t know about you, but that’s a lot of money to be leaving on the table. Of course, the company has probably gone over the numbers and if they were to introduce ads, they’d probably make some more money, but at the expense of pissing off nearly every existing Netflix customer. So far, the company’s subscription-based revenue model generates $8.8 billion annually, which apparently is enough keep their customers happy by keeping the service ad-free.