Netflix's ad-supported subscription model has major potential in Korea

Netflix's new ad-supported subscription model may earn the streaming giant 370 billion won ($280.2 million) in Korea this year, almost half of the total revenue the company made in the country last year. Netflix's new ad-supported subscription...

[NETFLIX]

Netflix's new ad-supported subscription model may earn the streaming giant 370 billion won ($280.2 million) in Korea this year, almost half of the total revenue the company made in the country last year.

Netflix's new ad-supported subscription, which began last November, is offered at a lower price but makes users watch ads as they stream content. It is estimated to make between 268.7 billion won and 371.6 billion won per year for the next three to five years, according to a study by Professor Byun Sang-kyu of Hoseo University’s division of culture and film media.

The number is based on the estimate that there are around 2.03 million to 2.81 million subscribers in Korea using the ad-supported program, and the assumption that more users will subscribe to the membership plan after Netflix announced that it plans to start rolling out paid account sharing some time in the second quarter of this year.

The new ad-supported plan, “Basic with Ads,” is currently available in 12 countries including the U.S., the U.K., France, Germany, Japan and Korea. In Korea, the membership is 5,500 won per month, 4,000 won cheaper than the ad-free plan. In the cheaper plan, users can only stream, not download Netflix content. Subscribers are exposed to four to five minutes of ads per hour of streaming and they cannot skip or fast-forward the ads.

The streaming giant seems to be confident in its ad-supported plan. Global monthly active users for the model reached nearly 5 million, Netflix reported at a recent presentation it held for potential advertisers.

"The signals are promising — engagement on our ads plan is similar to our comparable non-ads plans. That’s critical because it all starts and ends with consumers," Netflix Co-CEO Greg Peters said during the event.

Netflix said it was “pleased” with the progress of the ad-supported plan, pleased enough to upgrade its options for membership users. Last month, the streaming service upped the video quality from 720p to 1080p and allowed subscribers to watch two streams simultaneously.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]