If Netflix were ever thinking of introducing ads, they should forget it…
A study was conducted on user attitudes towards price inclines and increased ads on Netflix, and what effect this would have on the number of people paying for a subscription.
More than 1,200 respondents on Reddit were involved in the study and the results were somewhat surprising. A massive 90% stated that they would prefer Netflix to increase the price of the subscription than see ads.
For anyone who doubts that this is the case, in April Netflix increased the subscription price by 25% for their 17 million recorded users. The users response supported this study’s findings as Netflix customers were surprisingly willing to pay for the increase with no questions asked. Below are some of the Twitter comments…
So, that was a $2 price hike, but how much more can Netflix get away with charging before people start cancelling their subscriptions? And how much more would Netflix users pay to avoid ads?
To answer this question, 57% of people said that they would be happy with a $1-2 increase, 22% said they would go as high as a $2-3 increase, and the remaining 21% are willing to accept more than a $3 price hike. So, that’s how much Netflix customers would be willing to pay to avoid ads, but what if Netflix went ahead and included ads anyway.
What portion of their customers would they lose? Well, according to the this study, 74% of people said they would cancel their subscription, with only 26% of people saying that they would continue to pay for the service after the inclusion of ads.
More than 70% of Netflix customers would rather pay more money than see ads during a movie, so why is it that only 30% of Spotify customers are willing to pay for music at all, and 70% of Spotify users are satisfied with 30 second-long ads running through their music so they can listen for free?
Despite Netflix customers showing more of a willingness to pay than Spotify’s users. Spotify is actually known for having a great conversion rate from free-to-paid. So far, Spotify have made managed to convert 30 million of their 100 million active users through a series of strategies.
Firstly, the sign up process for Spotify is simple and easy, especially if you have a Facebook account. Then, there’s the numerous music discovery playlists that are updated frequently. And if that wasn’t tempting enough, the service offers a free 30-day trial to give customers a taste of the ad-free service, or at certain times in the year the service runs a 3 months for $0.99 deal. All of these strategies make the process from free-to-paid a smooth transition.
(Image by moneyblognewz, Creative Commons, Attribution 2.0 Generic, cc by 2.0)
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