Netflix Changed The TV Ad Dynamic - Without Selling Any

The future is clear: TV/video marketers will need to go scrambling for other proven, wide-reaching media. The premise is simple enough in looking at non-advertising TV streaming.

The more Netflix spends on TV movie content-- now approaching $15 billion -- the more platforms like Disney+ and HBO Max, need to keep boosting their non-ad platforms and/or limited ad-supported options.

And if all that happens, a greater share of ‘TV’ viewing continues to shift. Currently, there is a 25% share streaming TV usage right now, according to Nielsen -- and just 6% or so comes from ad-supported platforms or some sorts.

Will those ad platforms grow appreciably? The jury will be out for a while.

But the current popular streaming TV-video drug keeps on giving -- especially with high-profile, newsworthy streaming shows. Consumers think Netflix first -- and then everything else. That means no ads.



Brian Wieser, global president, business intelligence for GroupM, says of Netflix: “It will continue to cause their direct competitor streaming services to maintain low or nonexistent ad loads, and all of them will increasingly cause industry-wide ad-supported TV viewing to lose share of consumer time in countries around the world.”

Perhaps that’s why Disney+ isn’t moving in that direction with its own ad-supported option -- rather than leaving all that to its broad-based streaming platform Hulu. Still, HBO Max, Paramount+, Peacock, and others all have ad-supported options.

Here’s some of the alternative view at the moment: What happened this past upfront period? This is where media companies owning TV networks say there was a major shift of 20% to 30% of linear TV dollars moving to streaming platforms.

This would be significant in the world of a typical $20 billion national TV upfront advertising marketplace.

Expect this to continue as TV networks pursue a somewhat desperate relationship with marketers as their linear TV networks continues to crumble.

What really must irk TV networks is that Netflix has been able to do all of this and be profitable. But that isn’t the big deal. It is that Netflix has done this at scale, now with around 74 million U.S. subscribers and over 209 million globally.

Previously, the only thing to compare this to was HBO, as a “premium” cable no-advertising network, charging around $12 to $15 a month for top-flight originals and acquire movie programming where at best it hit 30 million subscribers.

Big ad-supported broadcast TV networks might have thought: Yes. HBO does a good job and they are profitable. But they will never have the scale of a broadcast network with around 100 million homes reach.

Call it Monday-morning quarterbacking for the TV business.

Future quarterbacking means looking for a big play with big money for programming to make a comeback.

2 comments about "Netflix Changed The TV Ad Dynamic - Without Selling Any".
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  1. Ed Papazian from Media Dynamics Inc, July 28, 2021 at 10:04 a.m.

    Wayne, I'm not so sure that Netflix is competing directly with many of the ad-supported streaming services---especially those fielded by the TV networks and large cable players. The latter two operate on a totally different business plan and have access to tons of program content---added to daily-- that is aired on their "linear TV" platforms---with most of their program costs already amortized by "linear" ad dollars. Netflix doesn't have this huge advantage. Also, it is not a given that a TV network/cable originated AVOD service must compete with Netflix in the sense that whoever gets the most subscribers "wins" while failure to do so is a "loss". The most likely scenario is that Netflix will---as a result of an over-crowded streaming service space---- begin to level off or lose subscribers at a faster rate than it acquires new ones. At the same time, it will probably develop that a typical TV network/cable AVOD service can be profitable at half of the subscriber levels that Netflix attains----because of the combined ad plus subscriber incomes as well as the huge amount of already paid for content in their libraries.

    Regarding ad clutter loads, early indications from TVision seem to be telling us that the low ad clutter rates on AVOD do not appear to translate into significantly higher  across-the- board  ad attentiveness levels---compared to "linear TV". In other words high levels of ad clutter may not be an issue. Once the dust settles down,  I expect to see a progressive---but significant---- increase in AVOD ad clutter levels which will produce  major hikes in ad incomes as the sellers are going to continue to demand---and get ----higher CPMs than they earn from "linear TV" while, at the same time, progressively hiking their "linear TV" base CPMs as was just done in the recent upfront.

  2. John Grono from GAP Research, July 28, 2021 at 6:37 p.m.

    Very interesting Wayne.

    There could be a twist in this over the long run.   A human trait is that we value scarcity.   The diamond market is an example.   Lithium is headed that way.

    Video is the most powerful way to present your brand.  It also delivers mass audiences in '30-second' blocks - small bites but with a big bang (if your cvreative and placement is good).

    So as people shy away from ad-supported video at a macro level, does that make the remaining advertising based video delivery systems audience (let's call it linear broadcast TV) even scarcer ... and maybe even more valuable?    Brand advertisers already pay huge amounts for Superbowl spots.   If the ad-load reduces within a programme could that make the ad environment more acceptable and watched (e.g. 5 x 30-second breaks in a one hour programme) with a higher rate and CPM?

    Just shooting the breeze, but may be worth cogitating over.

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