In an effort to reignite growth by luring in budget-conscious users, Netflix has released its first subscription package with ads. However, the hurried release, high prices for slots, and accompanying demands have left some advertisers unconvinced.
Basic with Ads, which launched this week in 12 nations, costs £4.99 per month in the UK, £2 less than its least expensive ad-free package. It aims to entice families whose budgets are contracting due to the cost of living crisis.
Despite the fact that popular Netflix series like The Crown and Stranger Things will be available, due to the service’s shortened seven-month launch window, 5–10% of the content it licenses from major Hollywood studios like Universal Pictures and Sony has not yet been renegotiated.
Netflix is introducing commercials for the first time, though not to all users just yet.
The largest streaming service in the world claimed that at launch, it had almost completely sold out of its ad inventory. This represents a light load of four to five minutes per hour compared to a traditional UK TV broadcaster, which can air up to 12 minutes per hour during primetime.
Anheuser-Busch InBev, the largest brewer in the world and owner of brands like Stella Artois and Budweiser, as well as beauty companies L’Oréal and Nyx jumped at the chance to be named launch partners.
Many media agencies, who purchase advertising space on behalf of clients, are dissatisfied with the product introduced to the market and the requirements placed on them to sign up.
“Unless you’re an advertiser who desperately wants the PR of being first on Netflix there are plenty of issues ahead of doing a decent ad deal for clients at launch,” said one media agency senior executive involved in talks about buying ad space.
Investors wiped more than $100 billion (£88 billion) off Netflix’s market value after it reported its first quarterly decline in subscriber numbers in more than ten years in April. In response, the business declared that, after years of opposition, it would launch an ad-supported tier in 2019. To beat a comparable offer from Disney+ that will be available in the US starting on December 8, that deadline was then hastily extended.
With Microsoft, Netflix is charging a premium of about £50 for every 1,000 viewers reached. That is roughly twice what ITV and Channel 4 charge for streaming advertisements, and it is more in line with the price of standard 30-second ad breaks on established broadcast TV channels.
With no independently verified audience data and no way to target ads, Netflix is also demanding quarterly spend guarantees from advertisers. According to a media source, they were told they had one week to sign a deal or they would have to wait until January.
At launch, Netflix lacks the technical tools necessary to target particular demographics, such as the 16–34 age group, which is highly sought after by advertisers, as well as other features found in traditional broadcast and video-on-demand TV.
Netflix is attempting to establish credibility by partnering with various independent organizations, such as Barb (the Broadcasters’ Audience Research Board) and the measurement partners DoubleVerify and Integral Ad Science. Netflix is only asking those subscribing to its new ad-supported tier for their date of birth and gender when they sign up.
Next year, when more information about the popularity of the new package and audience viewing habits will be available, it plans to build a much more substantial offer to entice advertisers, including wider ad targeting capability. At that time, it also plans to increase prices.
(Adapted from TheGuardian.com)