Why The Lack Of Ads May Be Netflix's Durable Competitive Advantage

A new survey of U.S. consumers that subscribe to a streaming video on demand (SVOD) service concluded that one of the most common reasons for canceling a service is the use of too many ads.

According to IBM's Cloud Video division, 27 percent of the nearly 1,000 respondents indicated a streaming video platform featuring too many ads is reason enough to part ways the service. This was the highest ranked reason to cancel, followed by 25 percent who would cancel because of high costs, 20 percent who cited lack of compelling content and 17 percent of users who couldn't solve technical issues.

Are Ads Really That Bad?

Moviegoers are used to sitting through up to 20 minutes of advertisements and previews, so this begs the question: Will an occasional 15 second video advertisement really annoy Netflix's subscriber base? After all, loading a movie takes a few seconds to buffer and ad can play while the content is loading.

Related Link: Bank Of America Cheers Netflix Set-Top Box Deal With Comcast; Maintains Buy

Netflix, Inc. NFLX's executives appear to have already understood that their client base won't tolerate ads. This was also re-confirmed in IBM's survey.

Meanwhile, an informal survey by Allflicks.com of 1,200 Reddit users showed that a whopping 74 percent would cancel their Netflix subscription if it were to ever adopt an ad-supported model.

"Netflix's users are sending the service a pretty clear message: if the service starts selling ads, customers would consider leaving," Allflicks noted.

For the time being it is safe to assume that ads won't be coming to Netflix, at least according to a Facebook post by Netflix's CEO Reed Hastings. On June 1 of last year, he posted: "No advertising coming onto Netflix. Period."