Netflix will have to include ads eventually, rivals say

Netflix sign Los Gatos
Netflix has always staunchly rejected the idea of inserting advertising into its streaming service. (Netflix)

Netflix’s widespread appeal is due in part to the service not featuring the kind of advertising that’s so prevalent on broadcast, cable and ad-supported video services. But some feel like Netflix can’t hold out forever.

Linda Yaccarino, chairman of advertising and client partnerships at NBCUniversal, and Peter Naylor, senior vice president of advertising sales at Hulu, said Netflix will eventually succumb to ballooning content costs and the allure of ad revenue.

According to CNBC, the pair were on a panel at Cannes Lions in France this week where they talked about ways Netflix can fight off increasing costs without continuing to raise subscription rates.

“When you have to make more programming that’s not guaranteed to be a hit, you have to spend more money, you have to build your brand, you have to help the consumer discover your stuff — the price will go up for the subscription, and it would be logical to mitigate those increases to take ads,” Yaccarino said according to CNBC.

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Both Hulu and NBCUniversal, through its streaming service launching next year, lean on advertising to boost online video revenues. But Netflix has always staunchly rejected the idea of inserting advertising into its streaming service.

Of course, that may just apply to the traditional ad breaks and formats that are still widely used today. The future of ad-supported video will likely look at lot different, Naylor said. He said that as the industry moves increasingly toward a video-on-demand structure it will rely less on the same 15- and 30-second ads seen in linear television.

Hulu has already been experimenting with different ad formats that are attempting to be less intrusive to the viewing experience. That includes interactive ads that prompt viewers toward signups and other transactions, and banner ads that pop up with relevant messages when users pause programming.

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