Ads Coming To Netflix Soon

This headline may be fiction today, but it’s reality tomorrow.

Sooner than most people think, commercials will be an integral part of streaming services. Netflix, Amazon Prime and others may not admit it yet, but their future depends on adding advertising into their revenue mix.

But isn’t a commercial-free format their differentiator? Wouldn’t their subscribers flee at the first opportunity when advertising is introduced?

Consider that the precedent for this move has already been set.

For many years, movie theaters refused to play commercials on their big screens. Now, they’re expected and accepted by theater patrons. An even better example is satellite radio’s transition to advertising. In satellite radio’s early years, they didn’t accept ads and made a big deal of that fact. People wanted an alternative to the traditional radio stations available for free in their local markets; they were willing to pay a subscription fee in exchange for no commercials.

But over time, things changed. Gradually, satellite stations began running advertising. And you know what? The subscribers didn’t desert in droves. And you know why? Because as the saying goes, content is king. Satellite radio offers a diversity of playlists that local radio can’t match. Subscribers value the big band station, the various oldies formats, the jazz and bluegrass options, the sports, politics and other talk radio options.

Initially, satellite subscribers probably would have been resistant to advertising. But over time, as they began to value the brand, this resistance melted. The same progression is likely to hold true for the video streaming services. These services are doing an excellent job of providing content—content that is diverse and convenient. They’ve built the brand to the point where advertising will be acceptable to most subscribers.

And make no mistake about it: Streaming services need the revenue advertising generates. That’s because competition is intensifying, and increased competition means price wars and possibly the loss of customers. Consider this headline from the April 19, 2016 issue of Fortune Magazine: “Amazon is Only the Tip of the Iceberg for Netflix When It Comes to Competition”.   The article notes how Amazon Prime is becoming an increasingly formidable competitor for Netflix, and that Google, Apple and Facebook are planning to launch video streaming services in the near future.

Savvy advertisers should be planning for the inevitable. They should be assessing the current group of streaming services—who their subscribers are, how many they reach and so on. They should also be contemplating the audiences for different types of shows and movies that dovetail with their target markets. And they should be brainstorming the type of commercial that might work best in a video streaming service format.

Sooner rather than later, Netflix or another service will test a commercial. When it generates revenue and subscribers don’t desert in droves, competitors will follow suit. Pretty soon, we will have trouble remembering a time when these services didn’t have advertising.

And before commercial-free purists wring their hands at this possibility, let me argue that advertising will be a good thing—not just for the services but for subscribers. With the additional money advertising produces, companies like Netflix can invest in technology upgrades that will result in a clearer streaming picture, as well as more original content. And as the quality and content improves, the number of subscribers will increase. All of which is great news for advertisers looking for ways to reach these audiences.

The truth is, wherever there are eyeballs there will be ads. Given the number of eyeballs glued to Netflix, Amazon and others, it’s not a question of if advertising will happen but when.