Netflix's addition of an ad-supported tier could generate as much as $2.5 billion in annual advertising revenue in the U.S. alone, while boosting overall domestic revenue by 21%, according to calculations conducted and published by The Information.
The paywalled tech-scoop publisher engages in some funky back-of-the-napkin math to come up with this conclusion, which is somewhat based on whether Netflix chooses an ad-heavy approach, similar to Hulu, which runs 6-7 minutes of ads per hour on its most popular, partially ad-supported $6.99-a-month tier, or a lighter one approaching the gentle 4 minutes per hour favored by HBO Max.
With already having told staff that it wants to launch an ad-supported tier by the end of 2022, and the company already engaged in discussions with ad-tech vendors including FreeWheel, also according to The Information, it's not a useless excercise.
For sake of argument, let's say Netflix chooses the HBO Max route.
The Information suggests that 66 million of Netflix's 75 million North American customers are in the U.S., with 30 million users in North America sharing service, and the most of the paying customers are enlisted in the $15.49-a-month tier.
Offering a $9.99-a-month partially ad-supported tier, the news site suggests that Netflix could grow its domestic subscriber pie by around 10 million users to 76 million, with 30 million ultimately choosing the cheaper ad-supported tier, and 46 million sticking with an ad-free premium service.
If Netflix were able to generate around $7 in advertising revenue per ad-supported subscriber, as Warner Bros. Discovery is doing with HBO Max, that would add up to around $2.5 billion in ad dollars, and total revenue would rise to $14.4 billion, up 21% from where it's at now.
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Daniel Frankel is the managing editor of Next TV, an internet publishing vertical focused on the business of video streaming. A Los Angeles-based writer and editor who has covered the media and technology industries for more than two decades, Daniel has worked on staff for publications including E! Online, Electronic Media, Mediaweek, Variety, paidContent and GigaOm. You can start living a healthier life with greater wealth and prosperity by following Daniel on Twitter today!