The Wall Street Journal reported on June 22 that Comcast and Google are the top contenders to serve ads on Netflix. The international daily newspaper said that this was announced when the streaming service rolled out its planned ad-supported tier. It added that Netflix is in the early stages of strategy development and has recently explored multiple tie-ups.
This deal with Comcast’s NBCUniversal and Google will mean that the telecommunications company will provide technology to serve ads via its video ad unit FreeWheel. In addition, NBCUniversal’s ad-sales team will help serve ads in the US and Europe.
On the other hand, Alphabet-owned Google already has a good deal of experience serving ads. This includes those on its own YouTube and YouTube TV video platforms. Netflix is already using the search engine’s ad-buying tools.
Exclusive Deals
These deals with NBCUniversal or Google will most likely be exclusive, says WSJ. They also announced that these two top contenders aren’t the only ones gunning for the chance. Roku, a digital media players company, was reported to be in talks with Netflix about ad partnerships.
Reports show that Netflix executives have already met with Roku and Comcast representatives. They will be discussing arrangements on who would be handling the ad sales and the technical infrastructure for the streaming giant’s forthcoming ad-supported tier service.
The report also said that Netflix aims to do pre-roll ads that run before a show begins, particularly in the fourth quarter. The company is now in negotiations with other entertainment companies to place ads on shows that Netflix didn’t create. Movie and TV licensing for paid and ad-free streaming will cost Netflix 20% more than for ad-free streaming alone.
A spokesperson from Netflix told WSJ that they are still deciding how to launch an ad-supported option lower in price.
Netflix Resisted Ads
For years, Netflix didn’t want ads. However, in April, Netflix CEO Reed Hastings announced the company’s plan for its ad-supported tier service. After this announcement, Netflix’s stock price decreased by more than 35%, while its revenue growth slowed after losing subscribers.
The company then announced that it will still offer ad-free streaming with its cheaper ad-free option—the streaming service’s prices in the US range from $9.99 to $19.99 per month. Hastings said the company is currently figuring it out in the next couple of years. However, Netflix told its employees that the ad-supported tier plans would roll out by the end of 2022.
Additionally, Netflix will charge added fees for account sharing with users in other households. This extra fee is already being charged in several countries such as Chile, Peru, and Costa Rica. This doesn’t apply to the additional 190 countries where Netflix provides its services.
The Prospects of Ads on Netflix
Some analysts see Netflix’s prospects in the ad market as bullish. They say that the company’s ad revenues will increase from $150 million in 2023 to $1.8 billion in 2025, according to a forecast made by MoffettNathanson.
As per a Nielsen study, the streamer has the most significant share in the US among its category in terms of the time spent viewing. Principal analyst of MoffettNathanson, Michael Nathanson, said on June 14 that the firm also assumes that Netflix will be able to sell ads on 50% of its content.
Aside from these plans on ad-supported tiers, Netflix plans to minimize password sharing. This, after losing subscribers due to this practice. A ban on password sharing may come along with these ad-supported plans.
On another note, Netflix has been looking to cut costs during its subscriber pullback. More than 300 employees were laid off on Thursday after letting go of 150 in May.
