Tag Archives: subscription fees

Advertising is More Valuable Than Premium Subscribers?

I read an article recently that surprised me. It explained that Netflix’s “Basic With Ads” subscribers are more valuable to Netflix than ad-free subscribers who pay $15.49 a month. I always thought the streaming business model depended on us all paying higher and higher subscription fees. Turns out, all these services want us to watch ads instead of paying higher fees.

Why? Because these companies learned that getting us to watch “premium ads” generates more revenue than monthly fees.

Photo credit: Koshiro K/Shutterstock

I personally love the ads. They give me a chance to get another drink, explain the show to my father-in-law, and use the bathroom. Plus, I’m learning about all kinds of new medicines that I didn’t even know I needed.

Now let’s consider the radio industry, which continues to rely on the ad model DSPs find so valuable, yet we seem to despise so much.

An unhappy program director may say “The commercials are killing the station!” But do listeners really feel that way?

We can argue another time about the legitimate issue regarding the quantity of commercials, but I have learned that commercials are expected on the radio—and maybe even quietly enjoyed by people like me.

So, what if we embraced the commercials? Worked hard at making them premium. And recognize that they are more valuable than any “subscription fee” we might someday be able to extract from an audience through our apps or other means.

When launching a new station, one of my mentors would include dummy commercials, mainly for concerts and new releases. He did this for two reasons: first, it gave the station credibility. Second, it created an expectation for commercials. Premium ones at that. Of course, he controlled the production and spent the time making them sound great.

I’m not the world’s biggest sports fan, but I have been enjoying the commercials I see during the baseball playoffs. Who doesn’t love a winged talking/singing Buffalo with his hooves on the bar? And it won’t be long until we have another round of Super Bowl ads to talk about.

There will always be advertising that radio stations are asked to run that is out of their control. But there are plenty that are within their control. Rather than focusing on how to not run them, maybe the focus should be on how to run and present them in a more appealing way.

Ads can be great if we make them great. And, as streaming services have learned, with the right ad structure there is real value to the bottom line.