To restart growth by luring cost-conscious consumers, Netflix has released its first subscription plan incorporating advertisements. However, some advertisers remain dubious due to the hasty introduction, expensive rates for slots, and related expectations.
The UK price of £4.99 per month for Basic with Ads, launched this week in 12 countries, is £2 cheaper than its lowest ad-free service and is intended to attract families whose budgets are tightening due to the cost of living issue.
Netflix successes like The Crown and Stranger Things will be accessible. Still, due to the reduced seven-month launch timeframe, roughly 5-10% of the material it licenses from large Hollywood companies like Universal Pictures and Sony remains to be renegotiated for the service.
The largest streaming service in the world said that it has almost sold out all of its ad inventory at launch, despite only airing ads for four to five minutes per hour (as opposed to the up to twelve minutes per hour that a typical UK TV broadcaster may run during primetime watching).
As for potential launch partners, companies like L’Oréal and Nyx in the cosmetics industry and Anheuser-Busch InBev, the biggest brewer in the world, owners of Stella Artois and Budweiser, respectively, have shown eagerness to be involved.
However, not all advertising agencies are happy with the product introduced to the market or with the requirements placed on them to join up.
A senior executive at a media firm remarked, “unless you’re an advertiser that badly needs the PR of appearing first on Netflix, there are lots of challenges ahead of striking a successful ad contract for clients at launch.”
Investors wiped off almost $100bn (£88bn) of Netflix’s market value in April after the company disclosed its first quarterly decrease in subscriber counts over a decade. The corporation said that after years of resisting the notion, it would launch an ad-supported tier next year. That date was abruptly moved forward to compete with a better deal from Disney+, which will begin streaming in the United States on December 8. When advertising on Netflix, Microsoft charges a hefty £50 for every 1,000 users they bring in. Ads on streaming services like ITV and Channel 4 cost about twice as much as they do during 30-second spots on regular broadcast TV networks.
One media source claims that Netflix informed them they needed to sign an agreement in a week or lose out until January, despite the fact that it is demanding quarterly expenditure guarantees from advertisers without independently verifiable viewership data and the capacity to tailor advertising.
As of its release, Netflix lacks the infrastructure to provide typical features seen in conventional broadcast and video-on-demand TV, such as the capacity to reach 16–34-year-old viewers, who are highly sought after by advertisers.
By partnering with organizations like Barb (the Broadcasters’ Audience Research Board) and measuring partners DoubleVerify and Integral Ad Science, Netflix is attempting to establish itself as a trustworthy service while merely requiring users’ dates of birth and sexes from those signing up for its new ad-supported tier.
By next year, when more information about the new package’s popularity and the audience watching patterns will be available, the company plans to construct a far more powerful offer to tempt advertisers, including greater ad targeting capacity and a subsequent price increase.