Netflix’s ad-supported tier will not include ads in kids’ programming or new movies, at least initially, according to the latest leak about the company’s planning.
Netflix has informed partners about these decisions, people familiar
with the plans told Bloomberg.
Netflix has not commented about this or other reports about the in-development ad tier, set to launch early next year, although it has stated that it will not make all of the content on its ad-free version available on the ad-supported version.
Netflix is reportedly in the process of renegotiating contracts with many of the studios from which it licenses thousands of titles in order to add ads, including Paramount Global, Warner Bros. Discovery and Sony Group. Sources have said that Netflix may need to pay 10% to 15% of the deals’ current value to secure the ad rights.
In addition to licensing cost considerations, most producers do not want ads to interrupt new movie releases, although Netflix would be free to run ads before and after the films. Ads in children’s programming must be carefully managed to avoid running afoul of government regulations.
However, even if Netflix did not take ads in most of its content, its potential revenue haul would be substantial, notes Bloomberg, citing some analysts’ estimates that project $3 billion to $4 billion per year in ad revenue from the new tier.
MoffettNathanson has projected that Netflix could yield a more modest $1.2 billion in annual ad revenue by 2025.