Reed Hastings was consistent, year after year. Any time someone asked the Netflix CEO when he’d introduce ads to his streaming service, he insisted that it made no sense. Netflix was a better service because it didn’t have ads, he would say.
That was when Netflix was growing. Now it’s shrinking — and now Netflix says it will have ads: Last month, after announcing that his company had lost subscribers for the first time in a decade, Hastings told investors he wanted to introduce a lower-priced version of the service that would have ads “over the next year or two,” though he was unclear about the details. “I’m sure we’ll just get in and figure it out.”
There’s a lot of figuring out to do. This week, Netflix has moved up the timetable, telling employees an ad tier could roll out before the end of 2022.
All of which underscores a significant change in the way streaming video companies view their business — and how some people are going to view TV and movies. TV advertising, which seemed like it was destined to be a relic, is suddenly very much alive again, even with services that once staked their identities on the absence of ads. Last year, for instance, HBOMax started selling a lower-priced tier with ads; Disney+ is adding one of its own this year.
It’s a head-snapping turn for an industry that seemed as though it was sprinting away from ads as fast as it could — in part because it was following Netflix’s anti-ad lead. But if you step back, there are two easy-to-understand reasons why streamers are embracing ads, willingly or reluctantly:
- Even in 2022, there’s an enormous amount of money in TV advertising, and it’s still growing: Media agency Zenith predicts advertisers will spend $65 billion on TV ads this year, up 4 percent from last year. Even in 2022, people still watch a lot of TV programming. But they’re increasingly watching it on streaming services on their TVs — streaming services now account for 30 percent of TV…