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A recent Deloitte study found that 55% of US households subscribe to a video streaming service, up from 49% last year. As the downward trend continues, competition for customers is growing in an increasingly crowded market, especially as Disney prepares to enter the streaming space with its own service.
After reaching a record price in early July, Netflix has seen its share price under pressure since its last earnings report, which has shown a blocking growth in the number of US subscribers. It added half the number of domestic subscribers estimated by analysts in the last quarter, and expectations of subscribers abroad were much lower.
Hulu, one of Netflix's major competitors, offers a "limited" commercial subscription that can be upgraded to a level without advertising. Hulu CEO Randy Freer recently mocked the amount of money spent by Netflix for the original content, telling CNBC: "I think money is a relative term. I think it's the way you spend that is really important.We will not do 800 shows next year, we'll probably do 20 or 25. "
Amazon Video Prime, available as part of the company's premium membership or as a separate subscription, broadcasts advertisements for its own programming. The YouTube Premium alphabet, formerly YouTube Red, offers an ad-free experience for original YouTube programming and other videos.
When Hub asked for interest in a new hypothetical subscription service to replace or add to existing services, 48% of respondents said that an ad-free feature would make it much more appealing.
For services such as the long-time free version of YouTube, ads are largely unavoidable. But if Netflix permanently implements ads for its already paying subscribers, the consequences for the streaming giant could be significant.
"Hulu had ads from the beginning and Netflix has always been ad-free," said Giegengack. "People always feel it more if you remove something that has been there and that they are used to."
Disclosure: Comcast is the owner of NBCUniversal, the parent company of CNBC and CNBC.com. Comcast is also co-owner of Hulu.
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