Netflix: third of consumers would cancel subscription if it became ad-funded

Research also indicates that password sharing is prevalent among UK consumers.

Netflix: subscriptions down but ad-funded model on way (Getty Images/IAM-photography)
Netflix: subscriptions down but ad-funded model on way (Getty Images/IAM-photography)

More than a third (36%) of UK consumers would cancel their Netflix subscription if it became ad funded, according to research by LoopMe.

The mobile ad platform asked almost 3000 UK consumers “under what circumstances, if any, would you keep a Netflix subscription if it became ad-funded?". While a third said they would cancel, a similar proportion of subscribers (33.7%) expressed willingness to pay a cheaper price for a service featuring ads, with male consumers more inclined to do so than women.

The findings are potentially encouraging for Netflix, which is considering a tiered approach to subscription, offering cheaper ad-funded packages and more expensive ad-free ones.

The findings come the month after Netflix's share price fell by almost 40% after it reported losing 200,000 subscribers in the first quarter of 2022. Its chief executive subsequently confirmed that ads would be on the menu at some stage in "the next year or two".

LoopMe's research also unearthed some telling results around sub-sharing. Just 14% of the 2,922 consumers surveyed said they subscribed to streaming services, while about half admitted they currently used Netflix – a strong indicator that users are password-sharing, which Netflix is clamping down on. Netflix itself has said about 100 million households are sharing subscriptions.

Meanwhile, the survey found that as consumers tighten their purse strings in the face of cost of living price hikes, nearly half (47%) of consumers considered affordability as their main reason for cancelling a streaming service subscription. Netflix's monthly subscription prices have risen twice in a year-and-a-half, with its mid-level option recently going up by £1 to £10.99. Nine per cent said they had cancelled one streaming service in the past month. Again, this was most pronounced among older consumers (55- to 64-year-olds).

Aside from affordability, 10.4% of respondents cited more competitive offerings on the market as the biggest reason to cancel, while 8.5% selected the presence of advertising, and 5.6% advertising that is annoying or irrelevant.

It is not only financial pressures that are leading Netflix customers to reconsider their relationship with the streaming service and its rivals, such as Disney+, NowTV and Amazon Prime Video. A "lack of interesting content" was cited by 29% as the biggest reason to cancel a streaming service, with women twice as likely as men to cut ties for this reason.

Sarah Rew, LoopMe's senior director, global marketing, said that it was "no surprise that people would find ways to save money where they can".

She continued: "It's clear Netflix will have to consider its affordability moving forward, with an ad-funded model a potential way to offer content at a lower cost. However, this might not be enough to retain or attract new subscribers.

"Netflix would have to focus on delivering relevant, quality content – both in terms of programming and advertising – with a full understanding of how brand advertising could enhance its offering, rather than detract from the experience."

Campaign recently asked a group of top media buyers and analysts for their thoughts on ads heading to Netflix. There was understandable excitement at the prospect. However, many said that the most likely outcome would be ad-free tiers coupled with ad-supported packages.

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