According to code found inside the company’s iPhone app, Netflix Inc. isn’t planning to let users of its new add-supported tier download shows and movies to their devices to allow for offline viewing. The code also suggests that users won’t be able to skid ads, which is a common move in the streaming world, and playback controls won’t be available during ad breaks—making it seem like Netflix is distinguishing the upcoming service from its current offerings. Developer Steve Moser shared with Bloomberg News:
“Downloads available on all plans except Netflix with ads."
Until now, with its regular user plan, viewers could download content for viewing in places that don’t have easy internet access, such as on airplanes. Netflix has already said that it won’t offer all of its content on the ad tier, so the move could help the company upsell users to its higher-end tiers after hooking them on the ad-supported version. According to Variety:
“Like most of our new initiatives, our intention is to roll it out, listen and learn, and iterate quickly to improve the offering. So, our advertising business in a few years will likely look quite different than what it looks like on day one."
Additional Ad Information
There are additional hidden references to its ad expansion in Netflix’s app, including text about helping the streamer tailor ads to specific users. One message reads, “Now, let’s set up your ad experience. We just need a few details to make sure you get the most relevant ads on Netflix. It’ll be really quick, we promise!”
In announcing Q2 earnings, Netflix told investors that the ad-supported plan will first be available “in a handful of markets where advertising spend is significant,” which presumably includes the United States. Last month Netflix also announced a pact with Microsoft to serve as its exclusive advertising partner. COO and chief product officer Greg Peters has confirmed that, at least initially, Netflix ads will be sold exclusively by Microsoft.
“Over time, our hope is to create a better-than-linear-TV advertisement model that’s more seamless and relevant for consumers, and more effective for our advertising partners. While it will take some time to grow our member base for the ad tier and the associated ad revenues, over the long run, we think advertising can enable substantial incremental membership (through lower prices) and profit growth (through ad revenues),” Netflix said in the Q2 earnings letter.
Wall Street analysts believe that Netflix’s advertising tier won’t cut into its existing subscriber base and could, in fact, help it gain total subscribers while driving up average revenue per user. During the Q2 earning interview, Peters said that Netflix believes the per-subscriber economics on the ad-supported plan will be “neutral” with or better than what it sees with traditional subscribers.
The streaming service, which eschewed advertising for years, is planning to roll out the ad-supported level by early next year. Thus far, the company has declined to comment. Though given that the service’s launch is several months away, it’s likely that Netflix’s plans haven’t been finalized, and its approach could still change.