Netflix, the number one American on-demand streaming service, has been the reality of television ever since the downfall of cable networks. From hundreds of Netflix specials and millions of users world-wide, the video subscription service has skyrocketed in fame and revenue over the past 20 years. So, why did Netflix decide to change their algorithm after over 25 years of success?
Starting in 2022, Netflix announced that they were introducing ads as a part of a new, basic with ads package. Slowly, they started integrating ads into all videos on the platform, including their originals. The reason for this addition was to introduce a “cheaper, ad-supported tier with the goal of attracting a new pool of subscribers, while cashing in on the money earned from advertisers,” according to a 2024 article from The Verge.
Netflix CEO Reed Hastings commented that he was not fond of the idea of ads at first, but by 2022, he decided to give ads a go.In a 2022 interview with CNBC, Hastings admitted that “I didn’t believe in the ad-supported tactic for us. I was wrong about that.” He was indeed wrong, because after only 3 months of adding the ads to the service, Netflix’s revenue shot up to 9.4 billion (around +15%) this March because of the basic ad plan (The Guardian). Though the company is making more profit due to the addition, there are benefits for users as well.
Netflix now has a cheaper plan available that is more accessible to the greater public. With the most basic plan at $6.99, more people can afford Netflix. This addition brings Netflix up to the third most affordable streaming service and the best for its value. Netflix has around 54,000 things to watch and is constantly switching out media unlike Disney+ and its other competitors.
Ultimately Netflix’s approach seems to be successful, but competitors like Peacock are catching up quickly in the race to the top. All us viewers can do is watch carefully and see what Netflix changes next!
