Commentary
Netflix's Ad Future
- by Todd Wasserman , Staff Writer, June 29, 2022
The big talk at this year’s upfronts was that Netflix was planning to launch an ad-supported tier of its service. But there are still many unanswered questions about an ad-supported Netflix. Below are a few we have tried to answer:
What will it cost? Netflix currently charges $9.99 a month for its basic service, and $15.49 a month for up to two streams. A Premium tier that allows up to four streams costs $19.99 per month. Netflix hasn’t yet said what the basic service with ads will cost, but estimates are that Netflix will charge around $5.99 a month for an ad-supported offering.
Is there demand for such an offering? According to a Morning Consult poll, 57% of American consumers prefer a low-cost version of Netflix over one they have to pay more for. Of course, the details matter. The average time of commercial loads is 13.3 minutes per hour, according to MoffettNathanson research. Assuming that Netflix doesn’t go over this threshold, the thinking is that viewers will abide with breaks along that space.
Will Netflix viewers who hadn’t considered an ad-supported tier make the jump? A survey in mid-2021 by Hub Entertainment Research said that 46% of Netflix viewers would make that switch, if the offering was priced at around $5 a month.
When will the tier be available? Netflix says that an offering will be available by the end of the year.
Todd, I think that that estimate of a typical ad-supported TV ad load of 13 minnutes per hour ---even if it includes AVOD/CTV buys---is on the low side.
However, if Netflix thinks it can get away with 13 minutes of commercial time per hour with lots of its current subs that sounds like a recipie for disater. Cut it down to six minutes per hour and that may work at the outset---but it remains to be seen how the ads would be presented. If Netflix decides to mimic YouTube and place the ads before and after content with an invitation to zap them after a few seconds---that should play well with viewers---but not with advertisers. If Netflix allows a mix of search, direct response and local, small fry advertisers with the big national TV brand commercials---with all of their commercials in the same break--- that may bother some viewers and, again, the big national brands wont be happy. If Netflix limits the commercials to "15s" or shorter messages that should please some subs but certainly not all of the major TV advertisers. So it all depends on what exactly Netflix will offer both subscribers---and advertisers.