Netflix Costs TV Nets Billions In Lost Ad Revenue

Although Netflix is not ad-supported and has nothing to do with TV marketers, the subscription video service is having an major effect on other networks’ TV advertising, according to a report.

An analysis in nScreenMedia estimates Netflix has taken anywhere from $3 billion to $6 billion per year off the table in TV advertising revenue as a result of the viewing on its platform. In the past, such viewing would have gone to ad-supported TV networks.

The report from digital media analyst Colin Dixon says the average U.S. Netflix subscriber misses out on seeing around thirty-five 30-second commercials per day. Looking at all of Netflix’s U.S. subscribers, this comes to nearly 2 billion ad views per day.

In a year, the average Netflix U.S. subscriber misses 5,753 ads during prime-time viewing and 7,032 ads during non-prime time. This analysis considers third-quarter 2017 results of 56.4 million Netflix streaming U.S. subscribers.

Using the approximate cost-per-thousand viewer of $18 in prime time, and $5 for non-prime time programming, the report says these missed ad views have a value of $139 per year per subscriber, or $7.6 billion for all subscribers.

This research suggests Netflix viewing has removed between 4% and 8% of total U.S. TV advertising, which in 2017 totaled $72 billion, per eMarketer.

Dixon cautions: “This analysis assumes Netflix viewing replaces only ad-supported television viewing. It doesn’t consider ad-skipping through DVRs, though Nielsen says the average U.S. adult only spends about 10% of TV viewing time on DVRs.”

He adds: “It also doesn’t consider the use of premium video networks like HBO and Showtime. These factors could lower the calculated value of lost ads by 15% to 20%.”

2 comments about "Netflix Costs TV Nets Billions In Lost Ad Revenue".
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  1. Jack Wakshlag from Media Strategy, Research & Analytics, February 15, 2018 at 12:28 p.m.

    Would be interesting to compare this to PBS. 

  2. Ed Papazian from Media Dynamics Inc, February 15, 2018 at 2:01 p.m.

    Netflix's primary competitive impact has been against all of broadcast TV, including local and syndicated shows aired by the stations as well as those shows put out by the national broadcast TV networks. Evidence we have seen indicates that this is largely----though not exclusively--- a function of the demos of Netflix subscribers---age: under 50; household Income: upscale---as these are the lightest viewers of broadcast style pap anyway. When it comes to basic cable, which accounts for half or more of an average adult's TV diet, Netflix subs are still pretty avid viewers---no doubt because of the variety that cable offers. Also we should note that if Netflix suddenly disappeared, and its  share of total viewing was redistributed to "TV", the possible broadcast TV GRP gain would be, perhaps, 8-12%, which, even though not as huge an amount as some think, could create a glut of broadcast GRPs available to buyers. This, in turn, might foster a buyers' market, which would depress CPMs and ad revenue gains.

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