Blame consumers for this. If a company sells a service for $10/mo ad-free and $9/mo completely loaded with ads, most people will pick the latter plan. Why won't they offer it then?
The people most likely to pay the extra $1 are the people who will watch the most, and then they'd lose more than $1/mo from them in ad impressions.
The real question is, why don't they have a completely free plan supported entirely by ads -- don't even try to get a huge premium for the ads, just sell lots of them, even if it's a 1:1 time relationship between ads and content. And then have another plan where you pay money and have zero ads.
Because the latter scheme should be the most profitable. To begin with you open up the market to people who wouldn't pay you at all but would watch ads, so you get more viewers, and on top of that it's effectively try before you buy where the trial requires watching ads, which means you can stay on it as long as you like because the service is still making money. People start watching a show and get tired of seeing ads so they subscribe, when they otherwise would never have started. Then you don't charge $10/mo for no ads, you charge $20, which is worth it to a lot of people because there are so many ads in the free version, and for the people it isn't you still make money from them by showing them lots of ads.
Free plans don't work when the cost of providing a service is high. Google, Facebook and the like can happily give away their products for free and lose money on the bottom N% of users, because it still amounts to pennies. Netflix has high bandwidth and content licensing costs that scale per user, so they need some barrier to entry.
Could they offset bandwidth by using torrents? I mean, it works for the pirates, even though there is no way to enforce people keep seeding (apart from private trackers maybe).
They already do something similar called open connect https://openconnect.netflix.com/en/
I am pretty sure the biggest cost is licensing. Also why you see Netflix producing so much original content.
>The people most likely to pay the extra $1 are the people who will watch the most
No the people who pay the extra are the ones who are most able to afford it. The outcome is still the same though as these are the people the advertisers want to target.
The people who can't afford the extra dollar are of very little value to the advertisers.
> No the people who pay the extra are the ones who are most able to afford it. The outcome is still the same though as these are the people the advertisers want to target.
Except that you can't get those people anyway because they value time more than money so they'll just buy some other content with no ads in it from someone else. Also, that doesn't matter if you just price the paid offering at the level that it makes up the actual ad revenue from the people who would use it.
> The people who can't afford the extra dollar are of very little value to the advertisers.
Rubbish. People are often budget constrained because they have high expenses rather than low income, e.g. anyone with kids. Being able to divert that spending to your brand from a competing brand has significant value to advertisers.
Completely free works sometimes (e.g. Facebook), but not always - the free plan might cannibalize lots of people who would otherwise pay significant amounts of money.
Seriously. There’s a lot of spaces where the options are pigeonholed. Where the middle option, if it exists, exists to ladder, not to provide actual value. The problem is you’re using Econ 101 but real world economics is quite a bit more complicated and nuanced
Because if they did the 9$ ads would plummet in price paid to the platform because it implies to the advertisers the consumers have no purchasing capability and may be price sensitive or else they would shell out the extra dollar. If they don't offer it and still sell adds they can demand advertisers pay the premium as the consumer has disposable income to buy the service and is likely price insensitive since they are now paying for something that was free.
Is this actually true? It's one of those bits of "telephone wisdom" I've heard passed from commenter to commenter on Hacker News (and Slashdot before that) for as long as I can remember, but nobody ever seems to have a primary source for it, it's always been a "just trust me" bit of knowledge.
No, what happens is people pick the $10 plan and then sometime later, when all the competition has disappeared, they yank on the enshittification handle, and start adding ads to the service and not reduce the price.
